OTTAWA – The CRTC unveiled sweeping changes to the Canadian TV broadcasting system earlier today. The Regulator has eliminated genre protection rules, shifted from Canadian content exhibition quotas to spending requirements and created a new class of online video-on-demand (VOD) services.
In a speech to the Canadian Club of Ottawa, Commission chair Jean-Pierre Blais underscored the need to adapt the broadcasting system to meet the realities of today where “people watch content in the ways, on the devices and at the times that most suit them.” He acknowledged that content is still king, but added that the viewer is now emperor.
Blais described the current environment as an Age of Abundance. “Content is everywhere on the Internet and on television. And it is available to us at any time of the day or night, on any device we choose. Ironically, that is now our central challenge. The trick for all of us – creators, distributors, viewers, even regulators – is how to adapt to life in this new age,” he said.
The emergence and growth of on-demand viewing enabled by online platforms, is therefore, a central part of today’s decision. In Broadcasting Regulatory Policy CRTC 2015-86, the Commission has decided to add another class of VOD offerings. Rather than regulate the online video of broadcasters, which it says “could stifle innovation and inhibit the ability of licensees to offer new online-only programming, in competition with online video services,” they should have an opportunity to further develop.
In essence, the CRTC is establishing hybrid type of VOD service, which will be able to operate online without a broadcasting licence and be offered to subscribers through a set-top box, too. But there are some significant caveats, particularly as it relates to exclusive content. For example, the hybrid VOD service will benefit from the ability to offer exclusive programming as is already possible under the Digital Media Exemption Order . It can also be offered on a closed BDU network without regulatory requirements for Canadian programming.
“However, in order to be eligible for exemption under the expanded order, the services must also be offered on the Internet to all Canadians without authentication to a BDU subscription,” reads the decision. Comments on how to word that new hybrid classification are due April 27.
VOD CONFUSION
While many immediately assumed the Commission was telling Bell Canada (CraveTV) as well as Rogers and Shaw (shomi) that they have to make their respective services available to all Canadians, over the internet, regardless of a BDU subscription, that’s not necessarily the case. Both services are currently sold connected to an existing subscription.
Neither CraveTV nor shomi are licensed entities in themselves. They are merely buckets of content with a brand, which is being sold to consumers via set top boxes (under the existing VOD license parameters of Bell, Rogers and Shaw) or online and via an app (under the DMEO). Neither the VOD licensing nor the DMEO is being changed with this new policy, so it would appear that shomi and CraveTV can continue operating under both.
It comes with one caveat for shomi, however. The new policy reminds the industry it will not allow entities operating under the DMEO to make content available only to its own BDU customers. VOD license holders are also prohibited from keeping content away from other carriers. Right now, shomi is only available to Shaw or Rogers 
customers, however the companies have been clear in saying that is not their long term plan and that they plan to make it more widely available once it works out all the bugs. CraveTV on the other hand, is being offered to other BDUs and is in fact carried by non-Bell companies such as Eastlink, Telus and Cable Cable.
GENRE PROTECTION ELIMINATED
In addition to allowing more viewing options, the Commission is also enabling a greater level of competition among discretionary specialty services. The decision strikes down genre protection as a key policy tool, noting that is has “become a regulatory burden that stands in the way of programming innovation” and has largely served to protect “from competition established brands and services, services which are primarily owned by vertically integrated companies.”
The CRTC says without genre exclusivity standing in the way, broadcasters will be able to create and acquire programming that best meets their audiences’ needs and “will now have the ability to adapt their programming strategies and shift their services into genres that may be more attractive and popular to Canadians and to develop new, innovative types and genres of programming without the need to meet or avoid genres proscribed by regulation.”
CANCON QUOTAS SHRINK
When it comes to the creation of compelling, high-quality Canadian content, the CRTC is moving away from the quantity versus quality discussion and clearly landed on the quality side. The Commission notes in its decision that exhibition rules, or quotas, have essentially led to very high incidences of repeats and that first runs are much more important. As a result, all licensed programming services will have to adhere to Canadian programming expenditure (CPE) requirements. For services that currently don’t have CPE rules, the Commission will assign one based on historical spending. As well, the large broadcast groups will see their CPE commitments remain at current levels.
The Commission is also cutting the Canadian content quota for local TV stations during the day from 55% to zero, but will keep the weekday prime time requirement that 50% of programming aired between 6:00 and 11:00 PM. Specialty channels, which currently have quotas that range from 15% to 85%, will see their Cancon requirements harmonized at 35% overall with no specific requirement for the evening hours. Broadcasters will also soon have more flexibility to better promote original Canadian television programs.
The high-quality mantra is also going to apply to the news environment. In the decision, the Commission is going to require news services to broadcast 16 hours per day of original programming, seven days a week over the broadcast year. As well, news services “must operate a live broadcast facility and maintain news bureaus in at least three regions other than that of the live broadcast facility (i.e., that it has demonstrable news gathering capabilities in several regions).”
PRODUCTION
The CRTC is also attempting to improve the funding situation for Canadian content. It notes in the decision that while there may be upwards of 900 TV production companies in Canada, many of them are temporary, are very small or program specific.
“This project-by-project system hinders growth and does not support the long-term health of the industry as a whole,” says the CRTC. “The production industry must move towards building sustainable, better capitalized production companies capable of monetizing the exploitation of their content over a longer period, in partnership with broadcasting services that have incentives to invest in content promotion.”
The decision recommends that governments establish new mechanisms to enable the development of larger, better-capitalized Canadian production companies that can develop multiple, high-quality programs. As well, the Canada Media Fund and the federal government must remove the requirement that a producer have a broadcast licence deal with a traditional broadcaster before being able to obtain funding.
TERMS OF TRADE AND POINTS, SHAVED
However, the CRTC also killed off the much maligned (by broadcasters) and much-loved (by producers) requirement for broadcasters to adhere to the CMPA’s Terms of Trade agreement. That will no longer be a condition of license.
“Much has changed in the television environment since 2006. In particular, digital rights and other rights issues have largely been clarified. Most licensees now have negotiated terms of trade agreements,” reads the decision. “These initial agreements provide broadcasters and producers with the baseline obligations they require to ensure that the content is widely available and properly monetized. Terms of trade agreements between producers and broadcasters from the large private English-language ownership groups have been in effect for nearly four years and the parties to these agreements have had the opportunity to evaluate the ways in which the current agreements have both succeeded and failed.
“In the Commission’s view, it is no longer necessary for the Commission to intervene in this relationship by requiring adherence to terms of trade agreements. The Commission considers that broadcasters and producers now have the clarity and experience they need to negotiate any future agreement among themselves. As such, the Commission will allow programming services to apply to remove requirements to adhere to a terms of trade agreement, effective 29 April 2016, five years after the original executed agreement was submitted to the Commission.”
The CRTC also takes aim at the Canadian content points system. It says that this only serves to identify the citizenship of the people behind the project, not the Canadian-ness of it. As a result, the Commission plans to launch two pilot projects designed to develop high-quality Canadian programs. The first will look at developing live-action drama or comedy productions from best-selling Canadian-authored novels and the second will focus on live-action drama or comedy productions with a budget of at least $2 million per hour.
Both pilots will require the screenwriter and one lead performer to be Canadian. As well, the production company is Canada with at least 75% of service costs and 75% of post production costs paid to Canadians.
BRP 2015-86 also says set-top box audience measurement is to be studied in a working group set up by April 13 and lastly, the CRTC has punted discoverability until later this fall when it will convene a Discoverability Summit aimed at finding ways to solve this tricky problem in an on-demand world.
All in, this will take many months to understand and figure out. The next (and final) decisions to come from the TV Policy review will have to do with carriage and speak to issues like pick and pay and skinny basic. The Commission has been targeting the 19th for that release, but it may not come until the week after.
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