The Wonk Report: Group Licence Renewal

Over the past two weeks the CRTC held hearings on first the French and then the English licence renewals for the big broadcast groups.  For the English (my focus) that means Corus (which now owns Shaw), Rogers and Bell.

A lot of the hearing went as expected.  The broadcast groups have argued that because of competition from Netflix they need more flexibility and that has as always been code for lowering their CanCon obligations.  They want lower CPEs (Canadian Programming Expenditures) for all Canadian programming and in particular, PNI (Programs of National Interest—drama, documentary and award shows).   The biggest issue for the content side of the industry is what will be the group CPE (set by policy at 30% of revenues but was it intended to be a goal or floor?) and the PNI CPE (set by policy for Bell, Rogers and Shaw at 5% but for Corus at 9% and now proposed by the CRTC as 5% for all).   The CRTC had said in the notice of hearing that spending levels would be maintained, the broadcasters all asked for breaks and the content side of the industry argued that historical levels should be maintained.

Traditionally, licence renewal hearings are about implementation of policy and are not intended to make policy.  Off the top, the Chair suggested that the TalkTV policy decision needed to be tweaked to reflect the changing circumstances so there were few challenges from the Commission about whether a discussion was really about policy and not licence.  Stakeholders brought up the question when it suited them (i.e. Corus complaining that the CMPA proposed definition of independent production was policy but still requesting a change to the policy to lower the PNI expenditure requirement). Some stakeholders reiterated policy proposals that they had taken during the TalkTV hearing.  CAFDE asked for a sub-quota of PNI for feature films, DOC for a sub-quota for documentaries and WGC for a sub-quota for development.  They were not challenged by the CRTC on the basis that these proposals were still policy proposals.

CMPA did refer to Terms of Trade in their questioning but their real goal was to block Corus’ use of Producer of Record (producer is pretty much independent in name only to get tax credits and other financing but Corus owns distribution rights and profits) agreements through a tighter definition of independent production.  There is no love lost between CMPA and Corus right now, which led to a rather surprising allegation that the CMPA had snuck in the independent production definition proposal in their presentation, which the Chair had to correct (it was in their submission as well as presentation – Corus admitted to never having read it).

Corus had asked to have all its conditions of licence specific to its children’s services removed as that would be consistent with the removal of the genre exclusivity policy under TalkTV.  That would mean that there would be no obligation to maintain YTV, Teletoon and Treehouse as children’s services but also that there would no longer be ad restrictions or a higher than average obligation to spend on Canadian programming.  Surprisingly, the CMPA appeared to be the only stakeholder concerned about this and had proposed keeping the restrictions or treating the Corus kids services as a mini-group.   As no one else expressed any concerns about the potential loss of significant players in Canadian children’s television, there is a serious risk that the CRTC will agree to Corus’ requests.

Two recurring themes in the questions in the hearing come from the TalkTV decision.  In that decision the CRTC proposed two pilot projects which would lower the required Canadian key crew point count (only screenwriter and one lead performer need to be Canadian) for certain circumstances:  literary adaptations and dramas with budgets over $2 million per hour.  The CRTC has the power to change the eligibility for CRTC certification to allow for these two exceptions but not to change all the other financing components.  In the recent new CIPF framework, it lowered the point count to 6 points in part to allow for these pilot projects.  The CRTC has not been able to convince Heritage that CAVCO and the CMF should also be amended to allow for these pilot projects.  Heritage is apparently still studying it.

It is not that surprising that Heritage might be reluctant to lower the point count for these two circumstances, particularly as there does not seem to be a need.  There are plenty of literary adaptations being produced under the current system and average budgets for one-hour dramas are over $2 million and are being financed.  What is surprising, a little, is the Chair complaining publicly about the lack of support from Heritage.

The other theme that came from TalkTV was the idea that there are too many thinly capitalized production companies.  The decision quoted the approximately 900 production companies tracked by the CMF, failing to understand that many of them were single-purpose production companies incorporated for a production but owned by the main production company.  The Chair revisited this theme several times during the hearing, asserting that there was not enough consolidation in the independent production sector and this was likely the reason that producers were not able to fully exploit their programs.  Stakeholders responded with different strategies.  On the one hand, the CMPA tried to explain the need for a diversity of production company sizes to ensure the existence of the next generation of successes while DOC took the position that its 700 members needed support so that they could stay “mom and pop” shops.

There were other themes of more interest to other participants in the broadcasting system, such as news, the application for OMNI to reduce its third language programming and have s.(9)(1)(h) status and whether there was any undue preference taking place among the vertically integrated media groups.

What happens now?  Based on past decisions there is no way to predict what the final decision will be, but the production industry is right to be worried that requirements to spend money on Canadian programming may be reduced for the next licence term.