OTTAWA-GATINEAU – May 7, 2009 – Is Cancon a cost centre or a break-even proposition for Canada’s over-the-air broadcasters? Among all the issues raised Thursday by independent producers, writers and directors at the CRTC’s licence renewal hearings for conventional ‘casters, this subject accounted for the most words per intervention.
The groups representing much of the Anglophone creative contingent brought forward a study concluding Canadian programming need no longer be seen, automatically, as a loss leader, a necessary evil, a perennial balance sheet pariah. The success of this hypothesis depends in large measure, however, on whether broadcasting ownership groups would be prepared to assess the profitability of domestic productions after amortizing the costs over many more years (and airings) than the year in which a production’s expenses were incurred.
In a report prepared for the Canadian Film and Television Production Association (CFTPA), ACTRA, the Directors Guild of Canada (DGC) and the Writers Guild of Canada (WGC), consultant Nordicity Group sets out to prove that although Canadian programming is not necessarily more profitable than American, it “can be profitable for Canadian broadcasting groups. As such, we make the case that any requirements that Canadian broadcasters acquire and exhibit Canadian programming are not necessarily the economic burden that Canadian broadcasters often portray them to be.”
In fact, the portrayals of Cancon as burden non pareil have been coming at the commissioners early and often since this hearing began April 27, especially from CTV, Canwest and Rogers. The latter two each requested that, given the economic downturn, the CRTC not require them to produce any priority programming over the next licence term. Canwest also asked that it be able to lower its use of independent productions from 75% to 50%.
Although the commissioners did not reveal specifics about the financials discussed with individual OTA broadcasters during in-camera sessions during the hearing, Chairman Konrad von Finckenstein pointed out several times to the guild and producer reps that those numbers demonstrated Canadian OTAs lose money on domestic content.
But according to the Nordicity study, Analysis of the Economics of Canadian Television Programming, the reputation of Canadian content, especially drama, is suffering because programmers take a short term approach to the accounting that only considers results for a first window on the original broadcaster. For instance, it says, a Canadian drama with an AMA audience of about 700,000 aired between Sunday and Thursday would realise a per?episode deficit of $138,264 for the broadcasting group, following seven airings in the conventional window. But, because the group would gain specialty rights via its initial licence fee, this drama could break even following 16 repeats on specialty, realizing a per-episode surplus of $5,416.
The study’s authors explain the careful, conservative methodology they use — including the recruitment of media buying, advertising and programming experts — and the data used to arrive at the average programming and non-programming costs, subscription and advertising revenues (including the implied CPM discounts and impact of Friday/Saturday scheduling for Canadian shows), among other factors.
Norm Bolen, President and CEO of the CFTPA, and Maureen Parker, Executive Director of the WGC, noted the consulting company’s pro-Cancon conclusions off the top of their presentations, while conceding the superior earning power of foreign shows. He then said Canadian broadcasters have become addicted to the ad revenues attracted by foreign programming.
In a release, Bolen gave a tidy summary: “We accept the fact that foreign programming is largely more profitable than Canadian programming. That’s a function of the fact that it’s far cheaper to acquire foreign content than to produce domestic programming. But in an environment where broadcasters now receive unlimited plays on multiple channels and platforms while paying minimal licence fees, the suggestion that Canadian content is a financial albatross cannot be taken at face value.”
Because Canadian broadcasters licence American programs for shorter periods and are entitled to fewer repeats, it’s important “to compare the one-year amortized value of U.S. versus Canadian shows,” said John Barrack, CFTPA National Executive Vice-President and Counsel during the association’s presentation.
“We cannot have the 100% or 200% profits that (foreign) programming provides,” added Sandra Cunningham, CFTPA Chair and President of Strada Films, but Canadian content does “make a contribution. More profitability will be possible,” she added, with some forthcoming programs that will be aired in reverse simulcast. Broadcasters do have the ability to make money on Canadian shows, she argued. “It’s an emerging (business) model.”
Bolen told the commissioners that the accounting model used by specialties does a better job of demonstrating that Canadian programming can be profitable.
“So you’re saying,” asked von Finckenstein, “if we imposed spending rules on conventional similar to those (imposed) on specialties, conventional would stop treating Canadian content as a burden and would treat it as an opportunity?”
“That’s precisely what we’re saying,” agreed Bolen.
When Commissioner Rita Cugini wondered whether the guilds and producers could still realize their ambitions for high-end, priority programming without including conventional TV in the sales mix, Parker noted that OTA is still where the mass audience is. Because specialties pull smaller audiences, their programming must cost less to produce.
“In no way should conventional be off the hook in terms of priority programming,” she said. “When you give the broadcasters more flexibility, they do less Canadian content,” concluded Parker. DGC CEO Brian Anthony added that when the economics improve, the creatives want to see an increase in priority programming obligations for OTA services.
When von Finckenstein wondered if the creative groups consider that the conventional services are facing structural or cyclical problems, Bolen said both. Having guided TV stations through recessions in the past, he said the revenue collapse this time round is part of the recessionary pattern, only worse. “I think (the OTAs) will see a very, very significant return of advertising to their revenue stream. They won’t get back to where they were, because there are some structural (and local) problems in there, but they’ll continue to be profitable businesses.”
“Do you believe (the conventional owners) will close stations?” asked the Chairman.
“The reason they assert they will close their conventionals,” Bolen responded, is to use this idea as “leverage to apply to you” so the commission will cut their Canadian content obligations. “There is still no greater bullhorn in the world than conventional television,” he added, driving traffic to specialty and other platforms, better than any other medium can do.
