Including two that won’t cost a cent
By Greg O’Brien
CAL MILLAR DOESN’T want to kick the federal government while it is scrambling hard to keep Canadians healthy and our economy upright. However, broadcasters need more help and Millar and his fellow broadcasters have some ideas.
The president of Channel Zero (owners of CHCH, Rewind and Silver Screen Classics) is genuinely thankful for what the federal government has already done for broadcasters, and the country, in trying to manage an unprecedented health crisis that has decimated the economy while we all tried, and try, to do the right things to make sure as few of us as possible get sick.
The Canada Emergency Wage Subsidy (CEWS) “is a brilliant idea,” he said in an interview last week with Cartt.ca. While it took a little while for his company to figure out, once they did, Channel Zero received its requested assistance within 10 days. CEWS has directly kept people on the payroll, by contributing to staff salaries, preventing layoffs at his company and across the sector. “It’s keeping people employed, and allowing you to keep going,” added Millar, who said he knows other broadcasters – who collectively are facing a 40% to 50% ad revenue decline in April and May – are using it and glad for it.
CEWS grants a 75% wage subsidy to companies which have lost 30% of their revenues but what now worries him is that CEWS is set to expire at the end of August – and it will be needed longer than that. Plus, what happens if companies using CEWS see revenues bounce back, but only to a 29% loss? They still desperately need the subsidy, but suddenly no longer qualify. While the federal government has said it is studying ways to slowly phase it out and build in some more gradation within the subsidy, no announcement has been made as of yet.
Millar is also thankful for the Canadian Heritage assistance package announced two months ago, some of which has been paid out, but he is very anxious to hear about the next phase, where there is to be aid coming for smaller broadcasters. Heritage Minister Steven Guilbeault said Tuesday an announcement on will be made “in the coming days.”
Setting the much-needed CEWS and Heritage emergency fund aside though, Millar (pictured) sat down for a chat with Cartt.ca last week (virtually, of course) and outlined four ways the federal government could act immediately and meaningfully help the broadcast sector.
600 MHz relocation expense reimbursement
WHEN CANADIAN BROADCASTERS were forced to switch from analog to digital over-the-air transmission (the final deadline for which was August 31, 2011), what was then Industry Canada and is now Innovation, Science and Economic Development Canada assigned them all new frequencies in the 600 MHz band. The broadcasters grumbled a little back then because of the expense, but complied, since it was abundantly clear well before 2011 that digital everything was the future.
However, when the mobile wireless world also wanted to use those frequencies (because data travels far and through walls and windows and trees and weather, just like off-air TV does), Canada followed what many other countries did and auctioned off those airwaves to wireless companies, forcing TV broadcasters once again to move. This is no mere software upgrade. New equipment must be purchased (even though the old gear still has 10-15 years of life left), riggers must be hired to install it on TV towers. In short, it’s not cheap, especially for independent broadcasters like Channel Zero.
“It’s a fairness issue. I’m subsidizing the wireless companies to get new frequency.” – Cal Millar, Channel Zero
The Local Independent Television Stations Group (which also includes Pattison Broadcasting, NTV, CHEK and others) of the Canadian Association of Broadcasters estimate it will cost their members (not all of whom have to change frequencies, mind you) around $10 million to make the required changes, all of which have to be complete by 2022. The LITS group has told the federal government it’s only fair for them to be reimbursed for this switch. They don’t have big wireless parent companies like Bell Media and Rogers Media. They can’t close towers the way Corus Entertainment chose to do to help deal with these costs. They can’t rely on government funding the way CBC and TVO will cover such upgrades.
It’s worth noting that the $10 million the LITS group is asking for is less than 0.3% of the $3.47 billion the federal government earned auctioning off the 600 MHz spectrum to Canada’s wireless companies.
“It’s a fairness issue. I’m subsidizing the wireless companies to get new frequency,” said Millar. “The government made a lot of money at the auction, more than they expected, and a number of independent Canadian broadcasters are paying for it out of our own pocket.
“If I send an employee out to a news shoot and they have the park the car and pay $20, they come back to me and hand me a bill for $20. They say, ‘I want my expense reimbursed. I didn’t have to go park there, but you made me.’ And we reimburse them. That’s fair. The tax system recognizes it. The reality is that I didn’t have to do this. I didn’t choose to do it. I was forced to do it.”
Prescription drug advertising
THIS IS A TOPIC Canadian broadcasters have pushed governments on over the years, to little avail, but the time for change may have come. The challenge with this potential revenue lifeline for broadcasters is change must come from an agency with which they rarely deal, Health Canada.
(Of course, the topics we mention here already cover many agencies like Heritage Canada, ISED, the Finance Department, Revenue Canada, to say nothing of the Prime Minister’s Office and the CRTC – which might contribute to the difficulty in making change happen.)
Health Canada prohibits prescription drug ads in Canadian media except for the drug’s name, price and quantity. Pharmaceutical companies are not allowed to say what a drug does or how it might help. This is why ads for Viagra only ever feature happy looking middle-aged men or cheery older couples and the brand’s name. However, there are few drugs which have broken through the public consciousness, or have such a simple message than those for erectile disfunction, so prescription drugs are rarely advertised direct to consumer.
Of course, not many countries in the Western world allow direct to consumer ads, for various reasons. Only New Zealand… and the United States. This means Canadian consumers are awash in American drug ads if they watch CNN or ABC or TLC or CBS, read American magazines, or just go online.
The direct-to-consumer prescription drug advertising market in the U.S. is a US$6 billion annual business. If Canadian broadcasters were to earn just 5% of that, it would be worth about C$400 million annually. Of course, Health Canada has its policy reasons to restrict such ads on Canadian airwaves, magazines and newspapers, but those policy objectives have long been trampled by the ad spillover from the States and a change to allow drugs ads here wouldn’t cost any money, but would potentially make a real difference in Canadian broadcasters’ bottom lines.
“If your policy objective is being circumvented accidentally by just the status quo, why don’t you rethink it?” – Millar
“Whatever those policy objectives are, all that’s really happening is – like any market interference – you’ve squeezed the balloon in one spot and it’s pushed out in another. Those companies still advertise,” said Millar. “Maybe they have to be longer ads, maybe they have to have all the disclaimers American ads have. Maybe it needs a Health Canada disclaimer like cigarette packages (but) all that’s happening is that money is not coming into the Canadian broadcast industry where we could actually use it. If your policy objective is being circumvented accidentally by just the status quo, why don’t you rethink it?”
Cease tax deductions for foreign digital advertising
DECADES AGO, “when WKBW and the other Buffalo stations were taking an inordinate amount of advertising from the CHCHs, the CBLTs, the CFTOs, the CKCOs of the world,” explained Millar, the federal government made a change to ensure ad dollars would remain with Canadian media by making changes to tax laws so that advertising with U.S. media was no longer tax deductible.
This has not been extended to the digital world. Advertising with the likes of Facebook, Google and Amazon, owners of more than 50% of all ad spending, is tax deductible, meaning hundreds of millions in revenue is leaving the country annually and Canadian broadcasters want that loophole closed, as do others.
“An actual answer of yes or no is actually more useful than ‘maybe’ right now.” – Millar
“If a Canadian business really believes that they need to advertise in Sports Illustrated or the New York Times, they do it, and that amount is simply not deductible,” said Millar, “but with internet advertising it’s fully deductible. That’s one of the reasons so many hundreds of millions of dollars bleed off to non-Canadian digital segments,” he said.
This, too, would not cost the federal government any taxpayer dollars.
CRTC Part II fees
THIS WOULD BE A one time, this-year-only aid. The Minister of Heritage already told the CRTC not to bother collecting Part I fees and the government would cover the estimated $30 million, in order to help broadcasters through the crisis. However, Part II licence fees are much larger than Part I. Last year, Part II fees were assessed at $116 million and Millar said there have been discussions with the federal government for it to cover Part II for this year.
“(Waiving) Part I was terrific. It’s helpful, was an easy thing to do, and it was immediate. That’s much appreciated,” said Millar. “What we haven’t heard is whether they’re going to do the same thing with the Part II fees.”
Timing, though, is now critical. Broadcaster fiscal year-ends are historically August 31st, so they are in the throes of trying to budget for a very uncertain future right now, but even those with calendar year fiscal years are scrambling so gaining certainty on some or all of these questions is better than hearing “soon” or “in the coming days.”
“An actual answer of yes or no is actually more useful than ‘maybe’ right now,” explained Millar, “because, as business, we have to start making decisions about next fiscal year.” Without answers soon, even if they receive aid down the road, “it won’t actually help us do the things that government wants to do to spur the economy.”
Editor’s note: The Independent Broadcast Group (IBG), of which Channel Zero is a member, will be appearing before the federal government’s Standing Committee on Finance as it hears about the government’s response to the Covid-19 crisis and will address some of these broadcasting issues with members of Parliament. Watch for coverage from that later this week.
