CRTC as Neanderthals
The Canadian Radio-Television and Telecommunications Commission (CRTC) is trying to maintain a system that has been overtaken by technology and changes in viewing habits, and one that has failed to achieve the primary objective of the CRTC; namely, to expand the production and market for Canadian content.
The CRTC has given Canadian broadcasters the right to negotiate for the payment of fees by the cable and satellite TV operators in Canada. The CRTC did not make such payments mandatory, and it set aside adopting a system for payment negotiations pending a court ruling on its legality. And this decision will be fought strenuously by the cable and satellite companies. It is also conceivable that the federal government will overrule the CRTC in order to prevent cable and satellite TV rates from rising.
The CRTC, in a report submitted to the federal cabinet, claimed that higher rates for consumers would not create “significant affordability issues”. Of course, members of the CRTC do not have to face the public to get elected.
The decision is a feeble and outdated attempt by the CRTC to prop up spending on Canadian content.
When the original broadcast licenses were issued to private companies, there was a quid pro quo. The broadcasters did not have to pay for the licenses – a significant lost opportunity for taxpayers – as long as they committed to air a certain number of hours of “Canadian” programming. The content requirement was met largely through local and national news programing and otherwise, relatively inexpensive programming aired outside the prime viewing hours.
In the mid-1970s, Canadian companies advertising on U.S. border TV stations were no longer permitted to deduct these expenditures against their income in Canada. This was intended to repatriate advertising revenues to Canadian broadcasters near the U.S. border. (As a historical footnote, this legislation led to the first S. 301 case under the U.S. Trade Act, a case which Canada lost.)
With viewing shifting from over-the-air to cable, simultaneous substitution (simulcasting) was introduced, whereby cable companies substitute Canadian channels for American signals when both broadcasters are showing the same program at the same time. This increased the advertising revenues of the traditional broadcast companies, and this is the reason Canadians do not get to see the U.S. ads during the Super Bowl. As another quid pro quo, the broadcasters had to increase the air time for Canadian content and actually air some of this content during prime viewing hours. Much of the Canadian content shown during such times tends to be poor imitations of U.S. game shows and reality shows.
To further the development and growth of Canadian content, tax credits for Canadian production have been made available, together with direct government funding (outside of the CBC), and funding through a levy imposed on cable and satellite companies (and passed on to consumers, with I guess “insignificant affordability issues”.)
Despite all these efforts, Canadian broadcasters continue to spend much more heavily on American programs ($846 million in 2009 compared to $287 million on Canadian content.)
When specialty broadcasters were licensed, starting in the 1980s, the CRTC allowed them to collect a fee per subscriber on cable and satellite systems. Since these non-traditional broadcasters focused on small segments of the market and since they were new in the market, advertising revenues alone would have been insufficient to support them. These specialty channels also were protected against U.S. competitors. That is why ESPN, MTV and many other U.S. cable channels are not available or were not available for a long period of time in Canada.
As advertising revenues plateaued for broadcasters, a number of the specialty channels have fared much better financially. Envy and declining share prices led the broadcasters to petition the CRTC to change the rules so that they could rely on two revenues streams as well.
But as more and more people are switching to the Internet to get the content they desire, and as the Canadian broadcasters generate very little original content themselves, they will continue to lose viewers, revenues and financial viability. In the era of the Internet, local news programming has become increasingly irrelevant as a source of information, especially for the under 40s.
It is time the government abandons the broadcasters and focus directly on funding Canadian projects that can compete for viewers through multiple distribution platforms. We do not need to continue subsidizing Canadian broadcasters to serve as conduits for such programs.
The opinions expressed in this blog are personal and do not reflect the views of either Global Brief or the Glendon School of Public and International Affairs.