I wanted to do the Hybrid VOD part of today’s decision separately because I think it warrants a little more context. As you will recall from my earlier post You Can’t Always Get What You Want, Shomi and CraveTV were oddly set up from a regulatory perspective. I struggled to understand how they were licensed and then finally it became clear to me (with some help from friends in the know) that both services were actually two services rather than one. The VOD service on your set-top box was regulated as a VOD service and the OTT service on your tablet/computer/phone was exempt under the Digital Media Exemption Order. That created the very odd situation that the VOD service had CanCon obligations but the OTT version did not but the consumer thought it was all the same service.

Very confusing, right? Even executives at Shomi and CraveTV were confused as they publicly stated that they had no CanCon obligations at both Banff Connect and Prime Time (though Bell’s Kevin Goldstein had no doubts about the twin-spirited nature of CraveTV).

The other problem though was that as an authenticated service (you have to identify yourself as a subscriber of a cable or satellite company that has a business agreement with Shomi or CraveTV as the case may be), if you were a subscriber of say Rogers then you could not subscribe to CraveTV. Or vice versa.

Today’s decision focused on the issue of exclusivity, which is a third issue that addresses the problem that, for example, Bell subscribers have no way of seeing “Transparent”, which is exclusive to Shomi. The CRTC’s argument is that it is ok if Netflix has exclusive content (e.g. “The 100”) because any Canadian can access it through their choice of internet provider. The same cannot be said of the exclusive content licensed by Shomi and CraveTV.

So the CRTC created a new licensing category for these ‘Hybrid VOD’ services, which makes total sense to me. The CRTC reiterated that to operate in Canada a service has to be authorized by the CRTC under a licence or an exemption order and then it must abide by the rules of that authorization (*cough* Netflix *cough*).   If a service is going to operate under the Digital Media Exemption Order then it has to be available to all Canadians over the internet. So a Hybrid VOD service can only take advantage of the Digital Media Exemption Order (and therefore no CanCon obligations) if it is ‘offered on the Internet to all Canadians without authentication to a BDU subscription’. Those exact words are key because Bell Media has always said that they offer CraveTV to Rogers and Shaw and it’s not their fault that Rogers and Shaw aren’t interested. The CRTC has sidestepped the whole issue of competition by saying that no BDU subscription can be required.

The exact wording of the new exemption has to still to be agreed upon and that could be contentious as Bell, Rogers and Shaw all fight to stay both exempt and not exempt. And we know that Bell is not afraid to appeal. So don’t expect any changes overnight but they could be coming.

“While content remains king, the incontestable truth is that the viewer is Emperor.” – Jean-Pierre Blais

Today Jean-Pierre Blais, Chair of the CRTC, announced a Talk TV decision focused on content.  Honestly, I’m not sure if the decisions will make the viewer feel that they have all the power but they are definitely going to change the landscape.  They range from minor decisions to major ones and also more than a few suggestions for other agencies. I counted 16 separate topics in the decision, with many of those topics referring to future proceedings or licence renewal hearings. So the world isn’t changing today. Well, it is a little.

The big picture message is that while we are not yet in an on demand world, in order for Canadian programming and broadcasters to compete in that evolving on demand world, not only does regulation have to change but so does the production sector. The emphasis is on big budget drama production that will be able to compete with American programming and internationally and will be easier to promote. This causes some concern for anything other than big budget drama programming. But let’s get into the highlights of the decision first.

First, many of the exhibition quotas for Canadian programming will be eliminated at the next licence renewal. The 50% Canadian in prime time quota has been retained for conventional broadcasters as the evidence shows that for those broadcasters, that is when most Canadians are watching television. It has been removed for the overall day and specialty services will have a flat 35% quota. It had been suggested during the hearing that Canadian quotas could be removed for the daytime and few, if anyone, had objected. It should also be noted that part of the rationale was that in order to meet the current quotas, many broadcasters were airing the same shows across their services with excessive repeats so the quotas were not achieving the desired goal of increase choice of quality Canadian programming. That’s hard to argue with.

Next, all services (except for those with fewer than 200,000 subscribers which will now be exempt from licensing and therefore all regulation) will now have a Canadian Programming Expenditure requirement. They will be maintained at current levels until the usual review at licence renewal, at which time services without a CPE will be assessed one based on historical spending. This gives services time to adjust, though there should be little adjustment. It widens the base and ensures that everyone is participating in the system. It is also the next step in the plan to ensure there is more money spent on quality programming.

Then we have the pilot projects. If you were following the Talk TV hearings you might remember John Morayniss of EOne Entertainment talking about his idea to have a category of program funding for bigger budget but less Canadian (and therefore more commercial) programs. It seemed out of place because it had little to do with the topics of the hearing or CRTC jurisdiction but Blais loved the conversation.   Now we see just how much he liked the conversation as evidenced by the two pilot projects.

For both there will be two types of programs that will be certified as Canadian though they do not fall within the guidelines. One is for adaptations of successful Canadian novels and the other is for programs with budgets over $2 million. They must have Canadian screenwriters, one lead performer and 75% of the costs paid to Canadians (not spent in Canada but TO Canadians who might live anywhere) but they do not have to be owned by Canadians. Note that while they are certified Canadian and qualify for broadcast purposes, those productions will not qualify for other domestic funding programs such as CMF or the domestic tax credit (though they will for the production service tax credit) so I assume that the thought is that a U.S. studio or broadcaster will happily finance most of the cost.

I’m very curious to see how often these exceptions are used. Keep in mind that broadcasters have steered away from literary adaptations lately because it is more cost-effective to promote ongoing series than a one off television movie. Also, it is a fundamental concept of government funding that it support the development of a Canadian industry. It is questionable to what extent a big budget drama owned by non-Canadians and created by and starring Canadians living in Hollywood helps the Canadian industry.

In addition to wanting to shift support to ex-pat Canadians, the decision also suggests that there are too many producers in Canada. Too many are thinly capitalized and are not sustainable as they live project to project. I will not argue that point but I will question how the sustainability of the independent production sector is the CRTC’s responsibility? It does have to ensure that the broadcasting system includes a significant contribution from that sector but that’s it. At the same time, the decision talks about wanting broadcasters to own more of the content so that they have an incentive to promote it, which is contradictory to an independent production sector with a focus on international sales. Broadcasters (Blue Ant and Corus say this repeatedly) want to own 100% of a program, relegating the producer to nothing more than the service producer that the decision complains about.

The CRTC urged provincial and federal governments to review their funding guidelines to incentivize co-production, promotion, foreign distribution and original online production, find new mechanisms to support sustainability and for the CMF to remove broadcast triggers for its funding. All those decisions are outside their jurisdiction. The CRTC will review the policies for certifying independent production funds such as the Independent Production Fund and Shaw Rocket Fund to ensure that they allow for ‘greater flexibility’. It is hoped that any major change would only be as the result of a hearing and not just imposed on those funds.

The genre exclusivity policy and nature of service definitions are gone immediately. There will be nothing to stop History Channel from airing more shows about Outlaw Bikers or to stop OLN from airing Whisker Wars. Except the market. It is up to you now to ensure diversity of programming (and no dreck). Make your voice heard. One of the problems with enforcing genre diversity was the constant attempts by group broadcasters to air programs across their group, regardless of the service’s genre. It is expected by the CRTC that with lower Canadian quotas there will be less pressure to do that (but they’ll still be motivated to lower costs by amortizing programming across services).

So once producers have produced bigger budget dramas and broadcasters have them in prime time then what? Promotion and discoverability.   Starting today, independent broadcasters (i.e. Vision, Oasis, APTN) will be able to spend up to 10% of their Canadian Programming Expenditure requirement on promotion costs. The big vertically integrated companies have sufficient resources and do not need that break. The CRTC believes that more needs to be done to ensure discoverability in an on demand world but isn’t sure exactly what (very little was said at the hearing) so will be convening an invite-only Discoverability Summit in Fall 2015 to try to determine what can be done.

You will notice of course that the emphasis here has been on big budget drama. If I was interested in producing any other kind of drama or say maybe a documentary, I might start packing my bags. The kids producers might want to hold off on packing just yet as the CRTC did admit that there was conflicting data at the hearing (basically kids programming organizations said the sector was at risk while broadcasters said it was not) so they want to get hard evidence. There will be a hearing to create kids program categories so that the data can be tracked. That puts a decision a few years down the road but it is a necessary first step.

That’s enough for this post. The Hybrid VOD part of the decision deserves its own post.

A Prime Time in Ottawa summary –  Part 2

By Cynthia Lynch

(See part 1 of this post here)

The Wonk Panel – Focus on TalkTV

This panel was tough to pull off because we don’t know what the decisions will bring, although of course everyone has a theory. Although there wasn’t much new on this panel, what struck me was the amount of general agreement on most of the issues from a diverse group of panellists – something that moderator Peter Miller pointed out but that the panellists don’t think will last. Right now, everyone’s business is being negatively affected by the slow-drip method of releasing decisions and the uncertain environment this creates. No one wants to sign a deal when the environment could change drastically, and Kevin Goldstein from Bell pointed out that the Commission doesn’t seem to have any problem messing with already signed agreements through regulatory action, a prospect he described as “terrifying”. The panellists all agreed that we are heading into a time of great disruption and transition, but no one really knows how it will play out.

The other thing the panellists agreed on was that the TalkTV proceeding was not the proceeding that we thought we were getting, although no one seemed to agree on what they thought they were getting. Jay Thomson from the CMPA mentioned that he thought the proceeding began with a conversation about balancing consumer choice with driving independent creation forward, but that got jettisoned. Goldstein said that they were hoping for a forward-looking policy that will help them compete but instead we seem to be debating irrelevant things that never should have been on the table. All in all, there was dissatisfaction with the Commission on all sides.

An interesting viewpoint was added to the panel from the consumer side, represented by Alysia Lau from the Public Interest Advocacy Centre (PIAC) and to a certain extent by John Simcoe from PricewaterhouseCoopers who started the panel off by presenting some research they have been doing on what consumers are expecting. Compared to other panels, though, this was one panel where the audience wasn’t talked about as much as in other areas. Asha Daniere from Blue Ant did speak up for the Commission protecting consumer choice, however, she made the point that consumer choice is not the tyranny of the majority. As an independent broadcaster, it is only natural that Blue Ant would be concerned about the implications of any pick-and-pay policies that come out of the decision; Daniere’s point was that consumers can’t pick something if there is no way for them to find out about it.
A highlight for me and some of the other wonkier wonks in the room was Jay Thomson’s (feigned?) incredulity at Kevin Goldstein’s admission that the Crave TV when offered through the BDU had Cancon requirements as a VOD service, but when offered as only an internet service, it is completely free of any requirements. Goldstein agreed with Thomson that this may seem ridiculous, but also pointed out that it is equally ridiculous that Netflix has no requirements. But in the end, the panel adopted a wait and see attitude; there’s not much more they could do until the rest of the decisions come out.

Kevin Crull Keynote

Bell Media President Kevin Crull’s Friday lunch speech seemed to be a summary of the case Bell will be making before the courts in their upcoming CRTC appeals. Although this was off-putting for some in the room, people at my table were convinced.

He started off by asking the audience about the type of broadcasting system we want to have – one with Canadian content, local news, diversity of voices – and then saying that if none of those things are important (which they obviously are, to that crowd) then we are on the right track. In his view, the private broadcasting system we have now is not sustainable and we either need to make some changes or give up and leave all the Canadian content creation to the CBC (with more funding, at taxpayers’ expense, of course).

As proof of the private system’s unsustainability, he offered up the fact that while CTV is having an immensely successfully year in the ratings, they aren’t making any money.

The fundamental flaw in the private system, as Crull sees it, is that there is no legitimate Canadian rights market. Broadcasters all over the world buy foreign (U.S.) content to attract audiences and subsidize the creation of their domestic content. It is only in Canada that audiences have direct access to that U.S. content, undermining broadcasters’ ability to make money from it.

In Crull’s view, letting Canadian cable systems deliver American networks into Canadian homes was one of the first steps in ruining the Canadian rights market and simultaneous substitution was an inelegant and insufficient system to protect Canadian rights. He argued that the channels should have been blocked in the first place and that this would still have given Canadians lots of choice in programming because the broadcasters would still bring those shows in.

I found it curious that someone whose business includes a distribution service, one that is partly built on delivering U.S. channels to Canadians, now wants to end that practice. Or more accurately, regrets that the practice ever existed in the first place. Clearly we would have had a different broadcasting system, and Bell would have had a different kind of business, if cable (and satellite) companies had never been allowed to distribute U.S. channels here.

At the same time, Crull went on to defend simultaneous substitution rigorously, pointing out all the good things that it brings to the system – advertising dollars to the tune of about $40 million for CTV, the ability for small Canadian businesses to reach local audiences, and American programming as a platform to launch and promote Canadian shows.

It’s impossible to know what will happen over the next few months and years, but it’s clear that Bell has established what they are willing to fight for, and protecting Canadian territory rights for their programming seems to be at the top of the list.

* * * * *

Although it may not seem like it, I have left off a lot of what happened at Prime Time this year. I heard from many people that this was one of the most interesting and engaging Prime Times ever, so kudos to Marguerite Pigott and programming consultant Kelly Lynne Ashton for putting together a great couple of days. And I encourage people to look up any and all of the sessions – I’m definitely going to give Michael Gubbins another listen.