CHPC Committee Report

Current Situation

CBC/Radio-Canada's current funding combines a parliamentary appropriation and advertising revenues. In fiscal 2005‑2006, the Corporation had $1.528 billion in revenue. It received $946 million in parliamentary appropriations, as well as one-time funding of $60 million (received yearly since 2002). A further $315 million came from advertising revenues and programme sales. Revenues from the speciality services have increased steadily since 2002, reaching $144 million in 2005-2006. This increase is due to the growing number of subscribers to CBC Newsworld, RDI and Galaxie.

Table 11: CBC/Radio-Canada Revenues, 2002 to 2006 (in $million)
Revenue source	2002	2003	2004	2005	2006
Parliamentary operating appropriations	$780	$877	$873	$877	$946
One-time funding	$60	$60	$60	$60	$60
Advertising and programme sales	$319	$284	$283	$322	$315
Various funding sources	$82	$73	$93	$87	$63
Subscriptions to specialty services	$118	$123	$132	$138	$144
TOTAL	$1359	$1417	$1441	$1484	$1528

Source: CBC/Radio-Canada Annual Reports

The government of Canada's 2007-2008 Main Estimates submitted to Parliament on February 27, 2007 indicate that CBC/Radio-Canada will receive $1.043 billion in 2007-2008.[260] Added to that amount will be the $60 million in one-time funding[261] for each of the next two years, announced on March 22, 2007 by the previous Minister of Canadian Heritage, the Honourable Beverly J. Oda. This funding, which CBC/Radio-Canada has received every year since 2001, allows the Corporation to make massive reinvestments in its programming in order to offer Canadians high-quality, typically Canadian programmes.

CBC/Radio-Canada spent $1.704 billion on operating expenses in 2005-2006, including $818 million (48%) for its main English-language radio and television services and $548 million (32%) for its main French-language radio and television services.

Source: CBC/Radio-Canada Annual Reports

During their appearance on March 22, 2007, CBC/Radio-Canada executives said that the Corporation is at a crossroads. It says it is facing serious financial challenges, because the budgets it has been given in recent years have not kept up with the cost of living. Its appropriation of roughly $1 billion is being whittled away by inflation. The Crown corporation's budget is roughly a third less, in constant dollars, than it was 10 years ago. According to Mr. Rabinovitch, the budget constraints will force him to make hard choices unless $150 million is invested in the near future.[262]

A number of witnesses echoed the President/CEO's misgivings. According to the Canadian Conference of the Arts, the fact that CBC/Radio-Canada's funding is not predictable prevents it from planning and forces it to live six months at a time.[263]

The Newfoundland and Labrador Film Development Corporation estimates that "many of the CBC's current woes can simply be attributed to funding that is lower than traditional Canadian levels, or than that in support of public broadcasters in other western nations, particularly given the affluence of the national government."[264]

Many witnesses said that the Corporation's should be funded primarily through parliamentary appropriations. Parliament created CBC/Radio-Canada, so Parliament should ensure it has appropriate funding.

"I'm sure one of the reasons things work the way they do currently is that CBC struggles with the funds that it has. Even with the one-time increase of, I believe, $60 million, it needs to be funded very well to provide Canadian dramatic production for Canadians from all across this country, so that Canadians can relate to other Canadians."

ACTRA, Winnipeg, 11 April 2007

The Directors Guild of Canada feels that, given the Corporation's broad mandate, the extensive geographic area to be served and the number of broadcasting services offered, it is clear that the level of funding is not sufficient.[265] The Writers Guild of Canada, for its part, does not agree with the idea of increasing CBC/Radio-Canada's parliamentary appropriations without improvements to its governance and increased financial accountability.[266]

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Committee's Position

Since the early 1990s, CBC/Radio-Canada has been dealing with budget constraints that have made it impossible to fulfill its mandate properly. As Figure 10 shows, the 1990s were, in the eyes of many, a period of crisis for the national public broadcaster.

Sources: CBC/Radio-Canada annual reports (various years)

An analysis that the Nordicity Group conducted for CBC/Radio-Canada in 2005 found that Canada ranked 16th out of 18 western countries in financial support for its public broadcaster. At a per capita contribution of $33, Canada was ahead only of New Zealand and the United States and well below the average of $80 per capita for all the countries analysed.[267] The study commissioned by CBC/Radio-Canada is revealing, although we have to be careful about making detailed comparisons with other countries. Public broadcasters around the world evolve in markets that differ significantly, whether geographically, linguistically or demographically.

It is essential that our national public broadcaster have the financial resources needed to offer its services, in two official languages, to all the Canadians living in an area of 10 million km². Proximity to the world's largest producer of entertainment poses specific challenges for CBC/Radio-Canada. For years now, Canadians have been witnessing the decline of CBC/Radio-Canada programming, particularly in the regions. The transition to digital and high-definition television represents another source of financial pressure on the Corporation. In a universe where media concentration has become the norm, a financially stable public broadcaster is even more necessary.

The Committee is also pleased by the government's decision to renew the one-time funding of $60 million over two years that expired in 2006-2007. Since 2002, this funding has served "to strengthen and enhance radio and television programming,"[268] and is a step in the right direction.

The Committee also welcomes the remarks by Mr.  Rabinovitch, who in March 2007 explained that over the past seven years CBC/Radio-Canada has become much more efficient and focused. It has generated $75 million in ongoing annual cost savings, and last year generated more than $93 million in non-advertising revenues through everything from merchandising to better use of its real estate assets.[269] The Committee congratulates the CBC/Radio-Canada management that is seeking to improve the Corporation's efficiency and management.

The vast majority of the witnesses we heard have called for stable, increased and multi-year funding for CBC/Radio-Canada. The recommendation was made to us with fervour and conviction by the majority of witnesses.

The Committee feels that Parliament must increase the appropriations it gives the public broadcaster, from $33 per capita to $40 per capita a year over the next seven years. We are asking the government for a clear commitment to preserve CBC/Radio-Canada.

RECOMMENDATION 4.1

The Standing Committee on Canadian Heritage recommends that the Government of Canada commit to stable, multi-year funding for CBC/Radio-Canada, indexed to the cost of living.  Funding should be for a period of not less than seven years and be established by means of the proposed memorandum of understanding.

RECOMMENDATION 4.2

The Government of Canada has approved additional one-time funding of $60 million annually since 2002. The Committee recommends that this parliamentary appropriation be permanently added to the Corporation's core funding.

RECOMMENDATION 4.3

The Standing Committee on Canadian Heritage recommends to the Government of Canada that any broadening of or addition to the mandate be appropriately reflected in CBC/Radio-Canada's parliamentary appropriations.

RECOMMENDATION 4.4

The Standing Committee on Canadian Heritage recommends that CBC/Radio-Canada's core funding be increased to an amount equivalent to at least $40 per capita.

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Impact of Budget Cuts on Reflecting the Regions

A number of witnesses cited a cause-and-effect relationship between the budget cuts at CBC/Radio-Canada in the mid-90s and the reduction in regional coverage.

While in Newfoundland and Labrador, the Committee heard from organisations that called for sufficient investment to reflect the country's diversity. The Newfoundland and Labrador Arts Council argued that regional investments should not be based on demographics. For instance, while the population of Newfoundland and Labrador represents 1.9% of Canada's population, investments should be not limited to that percentage.[270] The Newfoundland Independent Filmmakers Cooperative maintained that the government should give CBC/Radio-Canada sufficient resources to strengthen its commitment to regional production and diversity. It referred to Newfoundland and Labrador as a province that is "culturally cut off from the rest of the country."[271]

The Fédération culturelle canadienne-française (FCCF) is pleased with Radio-Canada. In particular, it stated that its radio programming "focus[es] on local and regional issues."[272] The organisation noted that more could be done in television: "If you want to reflect the regions, for people to relate and for television to bear witness, you have to provide the means for it to do so and do it well."[273]

The Canada Council for the Arts also argued that CBC/Radio-Canada does not accurately reflect the regional and cultural diversity of Canada, and that budget cuts are to blame. The Council sees technological change as a tool for giving the regions a stronger voice.[274]

CBC/Radio-Canada recognises the links between budget cuts and the quality of its English and French regional programming. Appearing before the Committee, the Corporation's executives acknowledged that the Corporation could "take more risks in developing new programmes, both in English and in French,"[275] but added that its resources are insufficient.

To reflect a region, programming must address that region's socio-cultural life and geography. To do this, it must portray the region's past through its history, music and residents. This is why CBC/Radio-Canada must maintain its local and regional presence throughout Canada. The Committee is of the opinion that CBC/Radio-Canada should increase the number of prime-time programmes that reflect all regions of Canada.

RECOMMENDATION 4.5

The Standing Committee on Canadian Heritage recommends that CBC/Radio-Canada give the regions greater prominence in all its services.

In January 2007, CBC/Radio-Canada presented a strategic plan to the Minister of Canadian Heritage to reach millions of English-speaking and French-speaking Canadians who contribute to the funding of CBC/Radio-Canada but do not have access to their national public broadcaster's local radio service. A copy of this plan was distributed to the members of the Standing Committee on Canadian Heritage last May. The Committee could see that the strategy would make it possible to offer local radio service to 8 million English-speaking and French-speaking Canadians in 37 communities. The plan recommends creating 15 new local production centres, expanding the coverage of five existing small stations and setting up eight news bureaus:

• new production centres: Montreal's South Shore (Quebec), Laurentians (Quebec), Drummondville (Quebec);
• new stations: Nanaimo (British Columbia), Chilliwack (British Columbia), Kelowna (British Columbia), Cranbrook (British Columbia), Fort MacMurray (Alberta), Red Deer (Alberta), Lethbridge (Alberta), Saskatoon (Saskatchewan), Kitchener (Ontario), Hamilton (Ontario), Barrie (Ontario), Kingston (Ontario);
• expansion of existing stations: Trois-Rivières (Quebec), Sherbrooke (Quebec), Rouyn-Noranda (Quebec), Calgary (Alberta), Vancouver (British Columbia);
• new bureaus: New Brunswick (Saint John, Campbellton, Tracadie-Sheila), Northern Ontario (North Bay, New Liskeard), Far North (Yellowknife, Iqaluit), Quebec (Beauce).[276]

A local presence in these communities would allow CBC/Radio-Canada to support and cover their day-to-day activities and strengthen their ties with the rest of Canada. Appearing before the Committee in November 2007, senior CBC/Radio-Canada officials told Committee members that the Corporation did not have at its disposal the financial resources to proceed with this plan.[277]. The Committee, for its part, supports the plan and believes that it is essential for as many Canadians as possible to have access to the services of CBC/Radio-Canada. Radio is the best way to ensure affordable local coverage.

RECOMMENDATION 4.6

The Standing Committee on Canadian Heritage supports the strategic plan submitted to the Minister of Canadian Heritage in January 2007, which is designed to improve programming for local communities on CBC/Radio-Canada's English- and French-language radio services.

The Canadian Television Fund and CBC/Radio-Canada

The Canadian Television Fund (CTF) was created in 1996 to support the production and broadcast of distinctively Canadian television programmes. It is a private/public partnership. The programming supported by the CTF is produced and broadcast in both official languages, and in a number of Aboriginal languages.

In 2006-2007, the CTF received contributions from the Government of Canada ($120 million) and from Canadian cable companies and direct satellite broadcast services ($150.6 million). In addition, it received $17.4 million in related revenues (recovery of investments and interest income), for a total of $288 million.[278]

The contribution agreement signed by PCH and the CTF specifically states that the CTF must "set aside an envelope equal to thirty-seven percent (37%) of the Fund's total revenues [.] for the Canadian Broadcasting Corporation/Société Radio-Canada (CBC/SRC)."[279] The 37% is "based on the historical average contributed by the CTF Programme to CBC/SRC triggered projects."[280] In 2006-2007, this amounted to $94.3 million for productions in English and French.[281]

In early 2007, two important contributors to the CTF voiced criticism about its mandate and operations. The two companies also complained that their contributions were indirectly subsidising a public broadcaster like CBC/Radio-Canada.

In February 2007, the CRTC created a Task Force to consider issues relating to the Canadian Television Fund. The purpose of the Task Force was to reach a consensus in order to resolve the concerns raised by the parties in question or at the very least to put forward potential solutions to the outstanding issues.

In its report of June 2007, the Task Force made a series of recommendations for changing the way the CTF operates. The Task Force confirmed the need for government support of the CTF and said that the Contribution Agreement between the Department of Canadian Heritage and the CTF is an effective way to ensure that the Government of Canada funding serves to "support culturally significant Canadian programmes and other special initiatives."[282]

The Task Force further recommended in its report that the CTF be allowed to allocate the funding from broadcasting distribution undertakings (BDUs) to a private funding component that is more flexible and market-oriented. A positive audience response would be one of the criteria used in allocating ongoing funding for these Canadian productions. The report also stated that "projects qualifying for the new private sector funding stream should be eligible for licensing by the CBC/Radio-Canada."[283]

It also recommended that the CTF devote up to 10% of its total budget, or about $25 million, to the funding of programmes for new platforms such as cell phones, the Web and video on demand. The Task Force report did not indicate however whether CBC/Radio-Canada could obtain funding for new media projects. The public hearings on the Task Force's report will be held in February 2008.

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Committee's Position

The Committee considers that the assistance provided by the CTF to independent producers for the creation of high-quality programming is crucial to CBC/Radio-Canada.

The English and French networks of CBC/Radio-Canada devote a significant part of their broadcast schedule to original Canadian content during prime time. So the Committee considers it normal for the national public broadcaster to continue receiving a significant share of its funding from the CTF for programmes licensed by CBC/Radio-Canada.

We are of the opinion that CBC/Radio-Canada directly serves the primary objective of the CTF, which is to support the production and broadcast of high-quality Canadian television programmes during peak viewing hours. Withdrawing the funding earmarked for CBC/Radio-Canada without sufficient financial compensation could have a negative impact on its ability to fulfill its mandate, not to mention the impact on its programming schedule.

RECOMMENDATION 4.7

The Standing Committee on Canadian Heritage recommends that CBC/Radio-Canada retain guaranteed access to the various existing public funding sources, including the Canadian Television Fund, in order to support the production and broadcast of Canadian audiovisual content.

CBC/Radio-Canada Advertising Revenues

In 2005-2006, CBC/Radio-Canada generated $315 million from advertising and programme sales. Over the years, advertising has become an important source of revenue for CBC/Radio-Canada. In the past five years, it has represented some 20% of revenues.

Source: CBC/Radio-Canada Annual Reports

The CAB considers that CBC/Radio-Canada's television programming strategy puts it in direct competition with the private sector. It argues that programming decisions are driven by the need to maximise television-viewing audiences in order to generate advertising revenues; the proper balance between the public and private elements of the Canadian broadcasting system is thus distorted.[284]

We noted the criticisms from Quebecor Media Inc., which, in its brief, criticised the fact that the national public broadcaster is dipping into the advertising revenues available to private broadcasters.[285]

The Committee understands the private broadcasters' perception that CBC/Radio-Canada's presence in the broadcasting system may have an effect on competition.

Some observers, like Bill Neville, even argue that the Corporation's dependence on advertising revenues make it a "subsidised commercial network," [286] rather than a public broadcaster. Others say that the increase in advertising revenues has hurt programming, which is looking more like the products offered by commercial channels. The Directors Guild of Canada feels that, with more than 50% of the revenues for English-language television coming from commercial sources in 2005-2006, the question is whether the CBC can call itself a public broadcaster.[287]

Some witnesses called on CBC/Radio-Canada television to reduce its dependence on advertising revenues. ACTRA, for example, recommended increasing the parliamentary appropriations to CBC/Radio-Canada so that it could provide its services with no advertising at all.[288]

The Association of Canada Advertisers does not feel that it would be a good idea to reduce CBC/Radio-Canada's dependence on advertising revenues because "[r]estricting commercial access on CBC would result in a no-win situation for all concerned. It would undermine the quality and variety of television programming; remove an important supply of commercial inventory for advertisers, especially in local markets; and lead to an increase in costs that would ultimately have to be borne by consumers. Moreover, advertisers' support of the public broadcaster allows governments to exercise budgetary prudence while still promoting objectives of public interest. Advertising is also a sort of barometer that can be used to judge public interest in programming."[289]

Former CBC/Radio-Canada President and CEO Robert Rabinovitch told the Committee that "advertising plays a very important role in keeping your nose to the grindstone in terms of your relationship to your audience."[290]

Corus Entertainment suggested that the CBC continue to follow the model it is currently following, "in other words, be commercial in some parts of its day and not so commercial in other parts of its day."[291]

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Committee's Position

As mentioned before, the vast majority of witnesses called for an end to advertising on CBC/Radio-Canada television, or for a substantial reduction. The main concern was that dependence on advertising revenues should not unduly influence the Corporation's programming decisions.

The Committee concedes that in an ideal world there would be no advertising on CBC/Radio-Canada television. We also accept the legitimacy of concerns about the national public broadcaster's growing dependence on advertising revenues and the resulting impact on programming choices. CBC/Radio-Canada's radio networks stand out from commercial radio largely because of the lack of advertising; the television networks have not been as successful in providing a distinctive service. The more television is funded through advertising, the less likely it becomes that public television can be truly different from the commercial networks.

It is nevertheless necessary to weigh the consequences of removing the Corporation's right to make use of advertising revenues. Without these revenues, it would be facing a shortfall of many millions of dollars. If its parliamentary appropriations remained unchanged, CBC/Radio-Canada would be forced to eliminate certain programming services. The Committee heard no serious suggestions for credible alternatives to compensate for such lost revenues. The other possibility would thus be to compensate for the loss of advertising revenues with another funding model.

While the Committee realises that advertising revenues are at this time a necessary part of CBC/Radio-Canada's funding model, we consider that the Corporation's dependence on these revenues should not influence its primary goal, which is to provide Canadian television programming that is different from that of other broadcasters.

RECOMMENDATION 4.8

The Committee recognizes the current necessity and value of advertising revenues from television and on new platforms, and accepts that the CBC/Radio-Canada continue to pursue those revenue streams. However, the Committee also recommends that the Government of Canada and CBC/Radio-Canada work toward decreasing CBC Radio-Canada's relative dependency on advertising revenues for television programming.

RECOMMENDATION 4.9

The Committee recommends, as part of the proposed memorandum of understanding, that negotiations between the Government and CBC/Radio-Canada should address the reduction of the Corporation's relative dependency on advertising revenues for television programming, without compromising service.