The Media and Local Communities | FRIENDS of Canadian Broadcasting

Presentation by FRIENDS of Canadian Broadcasting¹ to the House of Commons Standing Committee on Canadian Heritage

Madam Chair and Committee members: thanks for inviting FRIENDS to appear today. My name is Ian Morrison. With me is Peter Miller,² who has broad expertise in Canadian media issues, including local television, which, as you know, is synonymous with local TV news.

Television is the most important source of local news in Canada:³ A December 2015 survey by ThinkTV asked Canadian adults, “Which one of the following media is your primary source of local news?” At 36%, television eclipsed newspapers (23%), radio (20%) and the Internet (18%).

Peter collaborated with Nordicity to analyze the economic impact of the CRTC’s Let’s Talk TV policies in a major research report Canadian Television 2020: Technological and Regulatory Impacts,⁴ released earlier this year. Its key findings are that by 2020:

15,130 media jobs will be lost
there will be a $400 million drop in ‘Canadian Programming Expenditures’ (18%)
and a $1.4 billion hit to Canada’s GDP

All this as a direct result of Let’s Talk TV regulatory changes.

The CRTC has yet to release any economic assessment of the impact of Let’s Talk TV – suggesting a lapse in evidence-based decision making.

This loss has nothing to do with technological change, and will greatly harm the future viability of local television news.

The research study’s authors have advanced proposals to reduce the negative impact of the CRTC’s decisions by as much as 75%: “This would not, in our view, require ‘turning back the clock’ on all the Let’s Talk TV decisions. It would merely require relatively minor ‘tweaking’ that recognizes Canadians as broadcasting policy has always recognized them – not merely as consumers, but as creators and citizens too.”

Compounding this ‘hit’, television stations in small and medium markets are particularly vulnerable to adverse economic trends, according to a second Nordicity/Miller study Near Term Prospects for Local TV in Canada.⁵ The study’s conclusion is that “Canada’s local television heritage is at risk of major cutbacks and station closures – which could be avoided, deferred or minimized by the CRTC’s contemplated reallocation of mandatory Broadcast Distribution Undertaking (BDU) ‘local expression’ contributions, if focused on private small and medium market TV stations”.

This Near Term Prospects study projects that up to half of local stations in small and medium markets – where there is often no local TV alternative – will fade to black by 2020 in the absence of CRTC action. This would lead to an estimated 910 layoffs of journalists and others who work to put local news on the air.

The study also found that the most vulnerable stations are independently owned and in small markets such as Kamloops, Medicine Hat, Prince George, Lloydminster, Lethbridge, Red Deer, Regina, Yorkton, Prince Albert, Thunder Bay, Sudbury, Sault Ste. Marie, Timmins, North Bay, Peterborough, Kingston, Rivière du Loup, Val-d’Or, Rouyn-Noranda, Carleton, Rimouski, Sydney, Saint John, Moncton and St. John’s.⁶

When large-market local stations are included, the study projects job losses rising to 3,490.

As you know, local TV, especially news, is very popular with Canadians. A recent Nanos Research poll⁷ found that:

92% agree that local news is valuable to them.
90% agree that their federal Member of Parliament should work to keep local broadcasting strong in their community.

So, what can be done to protect local television news?

First, tax policy:

Internet advertising is driving structural change, first in print, now in television, as spending has increased eight-fold to $3.5 billion since 2006. That’s more than a third of all Canadian advertising.

Yet federal policies to support local media have not changed since the 1990s. The Income Tax Act should be updated to exclude tax deductibility for foreign-owned or controlled Internet advertising platforms in addition to cross-border broadcasters and newspapers. Tax deductibility should be restricted to Canadian-owned Internet sites.⁸

Australia has recently moved to require Netflix-like foreign program distributors to collect sales taxes. Rogers’ Shomi and Bell’s CraveTV collect HST from Canadian customers. But not their direct competitor, Netflix!

The Canadian Film or Video Production Tax Credit (CPTC) supports most independently produced Canadian programming other than local programming.⁹ You should recommend amending the eligibility rules to permit support for local news programming produced by local broadcasters.

We recommend that you invite officials from the Department of Finance to appear to outline options to keep more Canadian ad spending and subscribers’ money in Canada.

Second, CRTC policies:

The government has the right under Sections 7, 15, 26 and 28 of the Broadcasting Act to ask the Commission to reconsider decisions and policies in view of the government’s broadcasting policies and priorities.

You should recommend that the government instruct the Commission to:

increase BDU contributions to support local television
amend its Digital Media Exemption Order to require foreign and domestic over-the-top (OTT) television providers to contribute to Canadian programming, and
ensure that Internet service providers and mobile operators are required to give priority to Internet-distributed Canadian local media through such measures as exemption from bandwidth caps.¹⁰

You should ask the CRTC Chair to appear once the Local Television hearing decisions are announced.¹¹ You should pose some questions about recent TV policies, including why under Let’s Talk TV:

A majority of programs aired by Canadian broadcasters will no longer be required to be Canadian?
A majority of channels distributed into Canadian households will no longer be required to be Canadian?
Foreign broadcasters that distribute programs into Canadian households do not play by the same rules as Canadian broadcasters?

You should ask him to present evidence to support his statement that there is enough money in the system to fix the threats to local television, especially in small and medium markets. If you are not satisfied with his response, you should consider recommending to the government that it direct the Commission to make the survival of local television a priority.

Third, the 600 MHz Spectrum Auction: next year this spectrum will be repurposed from broadcast to mobile in sync with the United States, forcing Canadian TV broadcasters to purchase new transmission technology. While Congress has allocated a portion of the windfall revenues from this reallocation to compensate local broadcasters for this one-time burden, Canada has failed to do so. Funding this capital cost could make all the difference for independently-owned stations in small markets (for a small fraction of the windfall).

Fourth, study measures adopted in the United States, where local broadcasters benefit from numerous measures to strengthen local TV, including local-market rights protection rules, strong restrictions on the importation of distant signals on U.S. DTH¹² and the doctrine of ‘retransmission consent’.

And, finally, your Committee should consider holding hearings in some of the small-market cities where local television news is most threatened: a good short list would include St. John’s, Rivière du Loup, Peterborough and Kamloops.

Madam Chair, that’s all we can pack into ten minutes. We did not even mention the Trans Pacific Partnership. Peter and I would be happy to respond to any questions from Committee members, and we wish you success in your important work.

– 30 –

For information: Jim Thompson 613-447-9592

¹ FRIENDS is a non-partisan, independent watchdog for Canadian programming on radio, television and online supported by 364,000 Canadians. FRIENDS is not affiliated with any broadcaster or political party.

² Peter Miller is an Engineer and Lawyer with expertise regarding the impact of technological change on the Canadian broadcasting system. (See attached CV.)

³ nlogic Thinktv OmniVu Survey, December 2015, National A 18+ (Until recently, Thinktv was known as the TV Bureau of Canada.)

⁴ This research study was sponsored by FRIENDS in collaboration with ACTRA, CMG, DGC and Unifor: http://www.friends.ca/pub/13491

http://www.friends.ca/node/13490

http://www.les-amis.ca/node/13639

⁵ This research study was originally submitted to the CRTC on November 5, 2015.

https://www.friends.ca/files/PDF/nordicity-miller-report-on-future-of-local-tv-final.pdf

⁶ Small market stations are in cities with populations below 300,000; medium market stations are in cities with populations between 300K and 500K. Near Term Prospects, page 6.

⁷ Nanos Research, September 29, 2015: http://www.friends.ca/poll/13122

⁸ This century, foreign-owned Internet media have grown to an additional 25% of the Canadian ad market. Canadian advertisers get the same tax benefits from spending on those ads as from ads in Canadian publications and on Canadian broadcasters.

⁹ CPTC was developed when local programming was profitable.

¹⁰ Commonly known as ‘zero rating’

¹¹ The Local Television decisions are expected as early as this month.

¹² See, For example, http://www.fcc.gov/guides/television-broadcast-stations-satellite