Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 17 - Evidence - November 4, 2003
OTTAWA, Tuesday, November 4, 2003
The Standing Senate Committee on Transport and Communications met this day at 9:32 to examine the current state of Canadian media industries; emerging trends and developments in these industries; the media's role, rights, and responsibilities in Canadian society; and current and appropriate future policies relating thereto.
Senator Joan Fraser (Chairman) in the Chair.
[Translation]
The Chairman: Good morning and welcome to this new meeting of the Committee.
[English]
Today, we have with us representatives from Corus Entertainment Inc. We are joined by Mr. Cassaday, President and CEO; Mr. Paul Robertson, President of Corus Television and Nelvana; Mr. John Hayes, President of Corus Radio; and, Ms. Kathleen McNair, Vice President, Corporate and Regulatory Affairs and General Counsel. This a tremendous panel, and we will have an interesting time this morning.
Mr. John M. Cassaday, President and Chief Executive Officer, Corus Entertainment Inc.: Good morning, members of the committee. Thank you for inviting us here today. As the chairman said, I am the president and CEO of Corus Entertainment. We are pleased to be here today to represent Corus Entertainment in these proceedings and to share our perspective on the issues before this committee.
Corus Entertainment is one of Canada's leading media companies, and one of its newest. In September 1999, Shaw Communications rolled out its broadcasting assets into a newly created public company, Corus Entertainment. Corus is an integrated media and entertainment company and recognized as a leader in our industry. Our vision is to be globally recognized as Canada's most influential entertainment company.
In four years, Corus has grown considerably. When we began operations in September 1999, we had 11 radio stations. We now have 50. Our television assets in 1999 included the specialty networks YTV, Treehouse and CMT, as well as equity positions in three other specialty networks. We now also own the W Network and have a majority stake in Telelatino, Canada's premier ethnic specialty network. We also have joint control of Teletoon and an equity position in the Food Network. As well, Corus owns Western Canada's pay-TV movie service, Movie Central, three digital television services, including the Documentary Channel, in partnership with the CBC and the National Film Board, and three local television stations in Ontario.
Over the past four years, we have taken our place as the market leader in both radio and specialty television. Corus is making a major contribution to the broadcast and cultural landscape in Canada. Through our production company, Nelvana, we are also a leading supplier of Canadian animation programming to the world, and through Kids Can Press, we are the largest publisher of children's books in Canada.
You have heard of CKNW news, talk, sports in Vancouver, CHML hometown radio in Hamilton, CFPL in London, also CINW, all news radio in Montreal; YTV, the W network, Franklin the Turtle, Babar, the world's best known elephant — that is all us.
Corus has 50 radio stations from Quebec to British Columbia. We are Canada's largest radio operator in terms of revenue and audience tuning, and we use the collective strength of our 50 stations to serve our communities with the best in music, news, talk and sports programming.
Although we have built strength through the size of our radio operation and the operating efficiencies that this creates, our news and talk stations maintain editorial independence and rely heavily on local programming, including news coverage. This ensures that they provide local perspectives to their community and enhance the amount of news and information programming available to their listeners. Our radio stations also promote interaction between the stations and their audiences. We have a number of phone-in talk shows and we actively solicit audience feedback through e-mail.
To give you another example of this local independence, Corus also operates three local television stations in Kingston, Peterborough and Oshawa, Ontario. The stations are CBC affiliates, so they carry much of the national CBC schedule. However, Kingston and Peterborough each produce local supper hour and late night newscasts. Accordingly, the stations rely heavily on local programming in order to inform their communities and provide continued local perspective.
Corus has a commitment to excellence in all its operations. We also have a strong commitment to excellence as an employer. We strive to be a model employer and we are dedicated to providing an environment where employees feel challenged, respected and valued. We offer our over 2,800 employees across Canada access to a variety of programs that support advancement through education, such as our ``radio sales university'' and our recently established Corus university programs, which are designed to enhance management leadership skills.
A positive ``respect in the workplace'' policy provides a foundation for Corus employees to thrive in an environment free from all forms of discrimination, and we enforce a strict ``no harassment policy.'' In addition, we are proud to say that half of all Corus employees are female, with much higher representation on the board of directors and in senior management ranks than is the norm in the industry.
The message that we would like to share with you this morning is two-fold. First, Corus is an example of a company with interests in various media that contributes to a diversity of voices in the media. We take great care in this effort and great pride in our results.
Second, Corus believes that it is essential that government policies foster the development of strong Canadian media companies to ensure that there are Canadian voices and choices in the future. We must create and maintain an environment where Canadian companies can grow to both withstand the competition from international media giants and also become true players in the international arena.
Mr. John P. Hayes, President, Corus Radio, Corus Entertainment Inc.: In 1998 the CRTC issued a revised radio broadcasting policy, including a change with respect to multiple licence ownership. This change was made in an effort to ensure a strong well financed and well functioning radio industry for this country. The policy change allowed companies to increase the number of radio stations they operate in a single market depending on the size of the market. In a large market, which is defined as one with eight or more commercial radio stations, one company could own up to two FM stations and two AM stations.
So far, this policy change has proven to be very successful. It has improved the financial health of the country's commercial radio stations by allowing multiple licence owners to realize operating efficiencies in the administrative end of their operations. It has improved the diversity of our stations, it has improved our workplaces and it has improved the skill levels of our employees.
As for Corus Radio, we are Canada's market leader in revenue and audience listening. Nearly one in three Canadian listeners tune to a Corus radio station every week. As a result of our scope and our commitment, we make significant financial contributions to the development of Canadian musical talent and talent development initiatives.
The CRTC's ownership policy has allowed Corus Radio to operate more efficiently so that we can put the highest quality programming on the air. We have invested in research to ensure that our programming services are responsive to the desires of our local listeners. With audience testing and format mapping we are able to ensure that our services are relevant. Last year alone, Corus surveyed over 10,000 Canadians in our research efforts. We have also invested almost $2 million to date in Corus Radio Sales University, our sales training initiative.
Corus Radio has also made a significant investment in AM radio. We now operate seven of the top 10 commercial AM news talk radio stations in English Canada. Our news talk stations in Vancouver, Edmonton, Winnipeg, Hamilton and Calgary are market leaders, ranking as either the number one station or within the top three stations.
Additionally, Corus Radio has introduced an innovative and creative format on the AM band with MOJO radio — talk radio for guys — in both Toronto and Vancouver. We have also invested more than $5 million to launch and enhance our all-news AM stations in Montreal, operating one in English and one in French.
Clearly our AM stations provide the communities they serve with additional sources of local news and information programming. They also provide a meeting place where views can be shared and issues debated. Many have phone-in shows, which encourage listener discussion and debate and a range of opinions. They also act as an important vehicle to discuss issues of public concern. Our news talk stations were at the forefront of giving voice to a nation-wide radio debate over the Kyoto Protocol, providing an essential outlet for discussion of an issue that affects us all.
Although we operate news and talk stations in nine markets across Canada, Corus Radio does not have a national news editorial policy. News directors in local markets make the news coverage decisions because they are the best equipped to determine what is relevant for the audiences they serve. In fact, we believe that the greatest inherent strength of radio is its ability to react instantly to the needs and interests of a local community. By that definition, local news directors must make the decisions as to what stories get covered.
Our news and programming directors ensure that listeners receive fair and balanced views on matters of public concern. For instance, CJOB AM in Winnipeg has a broadcast quality line to the legislature building in order to provide thorough coverage of provincial news and issues. Also, once a week, Manitoba Premier Gary Doer comes right into the CJOB studios to take listener phone calls live on the air.
Since radio is predominantly a local medium, our news stations recognize that they are the news outlets that the community turns to for local programming. Our FM stations are also committed to carrying local news, providing frequent updates on news throughout the day.
Corus is proud of the role we play in our local communities. A striking example of this important role was recently demonstrated during the blackout experienced by most of Eastern and Southern Ontario this past August. Corus radio stations were up and running when the need for information was great.
Across Ontario, Corus radio stations kept listeners informed, connected and updated during the crisis by broadcasting important messages concerning service updates, city closures and traffic situations. At one time, for approximately 40 minutes right at the very earliest stage of the blackout, when listeners were most in need of information, MOJO AM radio in Toronto was the only station on the air. MOJO was also the only station to stay continuously on the air during the blackout.
Besides coverage of the blackout itself, newspapers covered the role that radio played in keeping people informed. In an article from the following day on the blackout, the Hamilton Spectator praised the admirable job that radio did to keep listeners informed. The article highlighted Corus station CHML AM, which turned to its familiar open-line format during the blackout, allowing its listeners to become its eyes and ears on the streets of Hamilton. The station helped to calm people's fears and tried to keep track of the many closures in the city.
In addition to Toronto and Hamilton, Corus stations in London, Kingston, Barrie, Guelph, Collingwood and Peterborough all ceased regular programming to provide blackout information.
In addition to our AM news stock stations, Corus Radio provides diverse musical programming formats, primarily on our FM stations, to local area listeners and makes significant contributions to the development of Canadian musical talent.
Under Corus ownership, a number of our stations have replaced U.S. syndicated programming with local originated content. For example, when we acquired the Toronto station CILQ Q107 FM WIC radio, we replaced Howard Stern with a locally produced morning show featuring John Derringer.
Recently, at our Edmonton station, Power 92.5, we dropped a U.S. syndicated show, ``Rick Dees Weekly Top 40,'' and replaced it with a new local initiative.
Corus radio stations are leaders in their communities. Our stations provide $31 million in support each year to local charities and community events through public service announcements and fundraisers. For example, our Winnipeg station, CJKR-FM Power 97 was the sponsor of the 2003 Blitz Build for Habitat for Humanity Winnipeg. Over the last two years, Power has played host to many live-to-air performances by an array of artists. These popular tracks have now been compiled on one CD. A limited-edition run of 2,000 copies of this CD available exclusively in Winnipeg sold out in two days and helped raise a large portion of the $90,000 that was raised to build a Habitat home, one of seven built in the area.
Not only did Power help raise money for Habitat, but Corus employees personally volunteered with Habitat and provided the vital skills that helped to build the house. This house is now home to a single mother and her three children.
We have also committed to spending more than $27.5 million on tangible benefit initiatives to support the development of Canadian talent. This includes over $10.3 million for the Radio Star Maker Fund; $3.3 million for Fonz Radio Star; almost $6.8 million for Factor; $2.5 million for MusicAction; and $500,000 for Canadian Music Week. In addition, Corus Radio stations make a regular annual contribution of $420,000 to a variety of Canadian talent development initiatives.
Corus Radio has the scale to make a major contribution. This scale adds to diversity because of our focus on local editorial. We are extremely aware of the responsibility we have as an operator of radio, a local medium. We take that responsibility very seriously and will continue to do so.
Mr. Paul Robertson, President, Corus Television and Nelvana, Corus Entertainment Inc.: Honourable senators, Corus Television is a leader in specialty television, with networks that are recognized from coast to coast, including YTV, W, CMT, Treehouse, Teletoon and Telelatino.
We also operate Western Canada's pay television movie service, Movie Central, and are playing a leading role in the rollout of digital television in Canada with the launch two years ago of our digital channels, Scream, The Documentary Channel and Discovery Kids.
Over the past five years, Corus Television Services have helped to trigger more than $1 billion in Canadian television production. Over the next seven years, Corus will spend more than $500 million on Canadian television programs.
Our national specialty networks carry high levels of Canadian content in the forms of kids' programming, drama, variety and lifestyle programming. They do not carry local or hard news.
Our conventional television broadcast stations in Ontario have no single editorial policy. Let us take a look at CKWS television, in Kingston, which has been on the air since the mid-1950s. As a CBC affiliate, CKWS-TV is a vehicle for CBC national and regional news to reach viewers in Southeastern Ontario, as well as the source for local news, weather and sports on television. This station produces more than 12.5 hours of local news per week, including early evening and late evening newscasts. The 12.5 hours of local news coverage a week are, incidentally, well above CKWS's basic licence requirement by the CRTC to produce nine hours and 10 minutes of local news programming per week. We consider this to be an exceptional amount of local news and we are proud of our achievements.
The news programming on CKWS includes structured 30- or 60-minute newscasts, with an anchorperson introducing locally produced television news stories on the daily events in the Kingston, Belleville and Brockville areas. The news programming features local event leaders and opinion makers, which is highly relevant to the people living in those communities.
The extent of local news programming is much the same at our other local stations in Peterborough and Oshawa. As the operators of these stations, we believe in the importance of maintaining these local voices, and are committed to maintaining the editorial independence in all of our conventional television stations.
Corus also owns one of the world's leading producers of animated children's programming. In the fall of 2001, Corus acquired Nelvana Limited. Nelvana is also one of this country's most successful exporters of Canadian cultural products, with loved characters such as Franklin, Little Bear and Babar.
Nelvana programming has been sold to over 200 countries around the world. In the U.S., Nelvana has more programs airing on broadcast networks than any other independent producer in the world.
Corus also owns Kids Can Press, a division of Nelvana. Kids Can Press is Canada's largest publisher of children's books. Among its numerous titles is a 2002 Governor General's Literary Award winner for a children's illustration called Alphabeasts.
Mr. Cassaday: Once again, we would like to thank you for inviting Corus Entertainment to participate in these proceedings. In our introductory remarks, we told you about the messages that we wanted to share with you today.
To conclude, we are very proud of our accomplishments and contributions to date. We look forward to the future and what it holds.
Corus is a positive example of how a company with interests in various media can remain deeply committed to maintaining an array of voices in the media and ensuring that the local communities we serve do not lose the local content that they desire.
The ability of our radio and television stations to speak to and for the communities in which they operate is a source of pride for Corus, and something that we will continue to safeguard.
We believe it is absolutely essential for the success of the Canadian media system that we create and maintain an environment where Canadian companies such as Corus can grow and thrive both domestically and internationally so that our contribution in Canada can also grow.
Our vision is to be recognized as Canada's most influential entertainment company. We believe that in order to achieve that vision, we must be able to operate in a predictable and supportive regulatory environment.
The media consolidation that we all saw in the last several years — and Corus has most certainly been a participant in that trend — has allowed for strong Canadian media companies with the resources to deliver outstanding programming that is about Canadians. This is essential in an ever-increasing competitive environment. The consolidation is the result of the increasing fragmentation of audiences due to the sheer abundance of choices available to consumers. Canadians have access to hundreds of television stations, both Canadian and foreign, as well as to numerous radio stations, newspapers, Internet sites and gaming platforms. The array of choices vying for the eyes and ears of Canadians is astounding.
What Canadians in general, and media industries specifically, do not need are further regulatory mechanisms to ensure media diversity in Canada. Corus believes it is critical for public policy instruments to be used to nurture and support the growth of strong media companies to safeguard and develop our cultural heritage.
The reality is that Canadian firms like Corus do not compete domestically, we compete internationally. We need the government's support, through a predictable and supportable regulatory environment, to counter the increasing competitive challenges that we face. This is essential for the health of our industry.
We also need the support in the form of stable funding for the Canadian Television Fund. We need to see the continued cooperation between broadcasters, distributors, producers and the federal government to fight the theft of illegal satellite signals.
The Radio Communications Act needs to be amended to provide for statutory damages. As well, the act should expressly provide for the seizure of grey- or black-market equipment by customs officers.
We also need to see reforms made to the Copyright Act. The copyright regime must be affordable, predictable and permit technological advancements.
How does all of this benefit the broadcasting system as a whole? Strong media companies such as Corus are able to become leaders in radio and television and introduce diverse programming choices to Canadians. We are also able to invest in and support the launch of digital channels like our documentary channel and make significant contributions to the development and production of Canadian programming and voices.
Strong media companies such as Corus are able to capitalize on cross-media synergies to promote Canadian talent and programming. Once more, thank you for inviting Corus Entertainment Inc. to participate in these proceedings. We will be pleased to answer any questions from the committee.
Senator Carney: I thank the witnesses for their very fine presentation, and I have two items to disclose to them.
The first is that I am a director of Rogers Media, so I have some knowledge of what you are talking about and I know about your outstanding record. The second is that I am the very proud aunt of Natalie Carney, who worked as a technical producer at CKNW, your station in Vancouver. She found it be a very fine station to work for. She went to Dubai to be a technical producer for the United Arab Republic and is now in Egypt doing the same work. She thought that CKNW and Corus was a great company to work for.
Some of the community benefits that you outlined are required by the CRTC as a licensing requirement for your expansion. As you buy radio stations and consolidate them, you are required to have community benefits. Is the extensive list of benefits that you have given us to meet those requirements or are they in excess of the CRTC requirements for acquiring new licences?
Mr. Cassaday: About $27 million was required as tangible benefits associated with the acquisition of various radio stations. Fundamental to the success of each radio station is the contribution they make locally, including involvement through public service announcements and activities with local charities and communities. Our Orphan's Fund at CKNW in Vancouver, with which you would be familiar, is hugely successful. We raised over $1 million in one single day.
Senator Carney: So you are not just meeting your regulatory requirements?
Mr. Cassaday: No. It is critical to our success that we are seen to be leaders in the community.
Senator Carney: You talked about multi-station licensing. I know that this is a real issue in radio. Do you think that the issuance by the CRTC of the right to have multi-stations in these markets, which has led to a proliferation of radio stations, is cannibalizing the market? You and other companies have many more stations in these markets, but what happens to your market share? In many cases, it is a stagnant or slow-growing market. What is your perception of what the proliferation of the right to hold licences has done to the market?
Mr. Cassaday: The most important thing to remember is that prior to the regulatory change in 1987 or 1998, approximately half the radio stations in Canada were losing money, most of them being AM stations. There was a requirement, therefore, for a fundamental change in the structure of the business.
In our opening remarks today, we talked about our ability, through the scale that we have achieved, to bring operating efficiencies and to add a lot in terms of research and reaching out to our listeners to make our stations more effective and competitive in the marketplace.
The single biggest threat to cannibalization of market share is not the multiple-station ownership rules but the licensing of new stations that has been quite prevalent in the last number of years. I would say that the Canadian radio business is as strong today as it has been in the last 15 years.
Senator Carney: What do you see as the future of digital television services? It is not exactly a money maker at the moment, but the technology seems to be driving this. What do you foresee happening in the world of digital television? You have 15 additional licences, which is quite a number for category 2 digital television services, so you must have faith in the future of this service. How will that impact on the Canadian viewer and the Canadian advertising market?
Mr. Cassaday: As the penetration of digital increases in Canada, it will provide additional opportunities for the growth of these digital channels. I think it is fair to say that today there are no profitable digital channels, but there are over 25 services on the air and available to Canadians that are developing their skills and attracting audiences.
The key factor today is low penetrations of digital. It is our view that digital will be ubiquitous within the next five to seven years, and at that time I think we will see the flowering of these digital channels and ultimately we will see them become profitable.
In our case, we have three digital channels. We lost about $4 million on them last year and will lose another $2 million this year. We think we will be profitable within two years on those services.
Senator Carney: What is driving it? There are only a certain number of viewers and a certain number of advertisers, so what is driving the growth in digital services?
Mr. Cassaday: Currently, all the funding for them is coming from subscriber fees. Once audiences increase as a result of the penetration of digital boxes, we will be able to attract advertisers. We are increasing our viewership on a regular basis. People are finding the documentary channel and watching it in increasing numbers. There is no question that there is an audience for these services. They cannot compete effectively 24 hours a day with outstanding programming, but if you look at the TV listings on a weekly basis, you will find programs of interest across the broad array of digital channels. That is what viewers are doing right now. They are finding choices that they want to make and they are tuning in to them.
Senator Carney: Given your interest in digital, have you any interest in going into the telecommunications aspect of broadcasting, bundling telecommunications with your digital channels?
Mr. Cassaday: We see ourselves as being a great partner for telecom services that want to bundle. If they want to use our services as value-added, then we see ourselves as being in a great position to help. However, because it is basically the broadcasting distribution undertakings, BDUs, that are the ultimate direct contact with our audiences, we have to work through them. We will be working through telecos as they get into the distribution of video in the future, particularly as it relates to the availability of movies and series on a video-on-demand basis. That is when we will become a real bundling partner for the telecom players.
Senator Carney: That is one of the directions in which the industry is going, and other people may want to explore that.
Senator Merchant: There are two areas in which I would like to seek your input. I am looking at the public interest versus special interests. The CRTC decision seemingly diminished competition in many markets by allowing a single company to own up to four radio stations, or three in smaller markets like Saskatoon and Regina. I understand that you can manage other radio stations.
In a situation where there may be only one or two companies controlling advertising rates and the times when advertisements are run, we are seeing a diminution of news, because many people are not interested in news broadcasting. The buyers of advertising are paying higher rates, because of the control exerted on the market.
How is this serving the public listening to radio?
Mr. Cassaday: There are a couple of layers to the answer to that question, but one must remember the context that radio was failing miserably in Canada. Over half our stations were losing money. Also, when the CRTC introduced multiple-station ownership, in the U.S. they had evolved beyond that to the second stage of deregulation. The first stage was the two AM stations plus two FM stations, which we are into now. The second stage has been called open skies in the U.S. We are far less advanced, therefore, in terms of the level of concentration than they are in the United States.
Also, in Canada we have the Competition Bureau. While the CRTC has said that it is possible to own two AM stations and two FM stations in a market that has more than eight radio stations, the Competition Bureau looks at the degree of ownership and generally will not approve consolidation that results in ownership levels that exceed 30 per cent of the share in any given market.
That is another safeguard. The major benefit to listeners and advertisers has been the level of diversity created as a result of it. In the past, when you had multiple operators with single stations in a market, all the formats went toward the lucrative demographic markets — targeting young men, or young women aged 18 to 35 — so we had a lot of rock stations and soft stations.
As a result of this, Mr. Hayes and his group have started to segment the radio offerings more successfully than in the past. What the listener has access to is a lot broader array of music and formats in talk than they had previously. That has been good for artists because now artists are able to introduce music in segments that might not normally have gotten on the air in the past. There has been tremendous public benefit, particularly as it relates to diversity.
The safeguards in place have been the level of competition afforded and of course the policy recognized that there might not be stations going forward if we did not change the industry. Mr. Hayes may have something to add in terms of benefits.
Mr. Hayes: By way of example, in Toronto, before we purchased stations Q107 and Edge 102, these two rock stations were head-to-head competitors. Since we made this acquisition, we could focus the two stations within the rock genre. Now Edge is a modern rock and Q is a classic rock station. That allows each to focus on a unique musical genre. There are several examples of this throughout our company.
We have been able to create new formats. Mojo talk radio for guys, on our AM stations in Toronto and Vancouver are a good example. Several stations that we consider to be in turn-around, or transformation, include a country music format for the Greater Toronto Area that emanates from our licence to Burlington. Country music was not on the airwaves in the Greater Toronto Area until we changed our format at CING and took it in this direction. There are also two all-news stations in Montreal; one in English and one in French. There are other examples throughout the company. I would not burden you with them but as a result of consolidation, diversity and more focused programming, reacting better to the needs and interests of more diverse audiences has certainly become the norm.
Senator Merchant: I have a question then regarding programming, just one aspect of it.
This is the pre-packaged programming that many stations run. I know that is very lucrative for the owners, but I wonder, again, how you feel that it is serving the audience? At certain times, let us say on the weekends, you have pre- packaged programming, so that kind of programming maybe lacks immediacy, contact, the humanity of having somebody at the other end, and you have the deejay making little snippets.
Sometimes you also buy programming from the U.S. I think there is something called ``Rick Dees'' or something, which may be good music, but it is not music that Canadian listeners are interested in or used to. So these are cheap time-fillers. I do not understand how this is really serving the audience or the public better than having the individual radio stations that used to be there before.
Mr. Hayes: That is a good question and it is one that we have wrestled with. This past year, we virtually cancelled 95 per cent of our syndicated programming agreements within Corus Radio, for a variety of reasons but at the head of the list was the reason that we did not feel that many of these programs reflected the needs and interest in our local community, such as ``Rick Dees.'' We carried ``Rick Dees'' in Edmonton and Calgary as well, and that program was replaced with local music shows. Our news talk stations in the west share many programs over the weekend hours that we produce ourselves, and are not pre-packaged but certainly some of them are pre-taped.
This is done for economic reasons. AM stations in Canada earn a very small profit; in fact, most of them lose money. Due to our tremendous emphasis on news and talk programming during the most-listened-to parts of the week on our AM stations, we need to have some relief on the weekends and we go to these pre-taped shows but again, they are produced here in Canada by our own company.
We have been through this issue. We wrestled it to the ground and decided that the best thing to do was to produce local programs. It has been a little more costly for us, but, ultimately, I think it makes us a better broadcaster.
Mr. Cassaday: It is also important that the committee recognize that a significant amount of our programming is live. A very small percentage of our overall programming is pre-packaged. As Mr. Hayes said, it is really only in those day parts that have the smallest audiences, such as overnight and early mornings on the weekends.
Senator Spivak: Following up on Senator Merchant, what is the mandate that you have for Canadian content, both in radio and television? I know that in television it is often more observed in the breach. Can you just give us an idea? For example, YTV, is most of that Canadian, or how does that work out?
Mr. Robertson: YTV has a very high level of Canadian content. It runs 60 per cent in prime, usually closer to 70 per cent Canadian content in prime, and 60 per cent overall. The kids really enjoy the cartoons made in Canada. Nelvana has been a big part of that. The kids do not know where the programs are from but they sure enjoy the shows.
Mr. Cassaday: For radio, the minimum Canadian content required is 35 per cent on our music services. We have a core value that says we will do what we say we will do, and we have instructed our managers that that is the minimum, not something that they want to round up from 34.8 to 35. That is the minimum.
Senator Spivak: What is the case? What percentage are you actually doing of music and of talk?
Mr. Cassaday: Thirty-five per cent.
Senator Spivak: You said, for example, that you replaced Howard Stern in Toronto with something else. Well, in that particular station, for example, what is your Canadian content?
Mr. Cassaday: We were not playing any music on the Howard Stern show so now that he is replaced with John Derringer, we are playing music on that show and there would be Canadian music played in that slot. There are different content requirements for spoken word than there are for music.
Senator Spivak: What you are saying, whatever the CRTC conditions are, you are meeting that?
Mr. Cassaday: We are meeting or exceeding all conditions of licence.
Senator Spivak: I wondered also about the illegal theft of satellite signals.
What is the situation in Canada?
Mr. Cassaday: It is a serious situation. We believe that there are between 750 and 1 million illegal dishes in Canada, either black-market or grey-market. That is the most recent information that we have. The reason for this is two-fold. I think there is a concern on the part of some that Canadians feel they are being underserved by not having access to services like HBO and Nickelodeon.
The fundamental reason that Canadians are availing themselves of black- and grey-market dishes, based on the research that we have seen, is that they can get it for free or at a very low cost. That is why we are continuing to press hard with the government that legislation be brought in to really bear down on this problem, because we own the rights to these U.S. shows that are being seen in Canada; we have paid for them. We are entitled to territorial exclusivity. Second, every time that someone avails himself or herself of a black-market dish, they are not making the contribution to the system.
In the case of television, on average, every service that we have, a third of our revenue goes into the production of Canadian content. Every consumer who is not paying into the system, is cutting into the availability of Canadian programming going forward.
Ms. McNair, do you have anything to add to that?
Ms. Kathleen McNair, Vice-President, Corporate and Regulatory Affairs, General Counsel, Corus Entertainment Inc.: Honourable senators, we were very encouraged when we saw the amendments to the Radio Communications Act, which would increase the penalties for signal theft. We are hopeful that the government will push those through on an expedited basis, because it is a huge problem.
Senator Spivak: Is it still the same system? Do people get an address in the United States?
Mr. Cassaday: There are three ways that this system is being abused right now. The first is black market. Black market is out-and-out theft, that is, they are acquiring a dish through a Canadian distributor, they are getting an encrypted card and they are off and running and getting access to all the U.S. services. The second way that people do this is through what is called the grey-market dish. That is the case where they have a U.S. address and they are actually paying something for their programming, but it is illegal to avail yourself of this kind of service in Canada. The third route is the encryption and theft of signals for licensed Canadian satellite services. Bell Expressvu service is the one that has been most easily hacked by Canadians. Bell has now put in place procedures to try to check whether or not the subscribers getting the programming are actually paid Bell Expressvu subscribers. They are crashing their system and starting it up again with all the subscribers that are actually paying, and those who are ripping the system off are not able to use it.
Senator Spivak: What is your view about not only the Internet as a competitor to everything else as a source of news, but also Internet radio?
Mr. Cassaday: We are deeply committed to the Internet on both radio and television. Virtually all of our radio licences have complementary Internet sites. Our Edge site in Toronto is a hugely successful site. That service is available worldwide, but it is one of the most listened-to radio stations on the Web in the world because of its distinctiveness.
We are also committed to the Internet on our children's properties in particular. YTV is the number-one kid Web site in the country. We also provide a complementary Web site on YTV, which is a chat facility for kids with the distinction being that the parent must subscribe the child to the service and we monitor it 24/7 to ensure the safety of the site. It is a community for kids where they can work on-line.
We also worked with Microsoft and the CNIB to create the first teen portal for the blind, which is something that we are very proud to have been involved with, and something that, through the creativity of our people in our television group has really enriched the lives of young blind people in Canada.
Senator Graham: I am very impressed with what the presenters have had to say.
Having said that, I wish to raise a point. I recognize that Senator Carney may have a conflict here, because I will mention Rogers. Rogers appeared before the committee and recommended that foreign ownership restrictions be lifted for carriers, that would be cable, and not for content providers, meaning the broadcasters.
What is your position with respect to foreign ownership restrictions?
Mr. Cassaday: We share that view, senator. You know, if we had access to another couple hundred million dollars in capital, we do not know what we would do with it. Our capital requirements are modest. A company as significant as we have become in the four years since our existence, our total capital requirements on an annual basis are in the $20 million to $25 million range.
In the case of major BDUs, where they have huge capital requirements, I understand their need for foreign capital. However, on our side of the business, it does not exist to the same degree.
Senator Graham: One witness suggested that if foreign ownership restrictions were lifted in Canada, there would not be a way of foreign capital flowing to Canada, perhaps because of the different regulatory and tax environment in Canada, versus the U.S.? Do you agree with that assessment?
Mr. Cassaday: No, I do not. Canada has very desirable assets. There is not a company in the United States that would not be extraordinarily interested in acquiring Corus if it were available.
Senator Graham: In your presentation this morning, you said that nearly one in three Canadian listeners tune into a Corus radio station each week. That is very impressive. Did you bring any BBM figures with you that you could leave with us?
Mr. Cassaday: No, we did not. However, we could certainly provide that information. The bottom line is that we are market leaders in Vancouver, Calgary, Edmonton, and Winnipeg. We have huge strength in the west, in French and English Montreal and we are developing strength in southern Ontario. If there is specific data that you would like, we could provide that.
The Chairman: The committee could use that information, with particular attention to the news and information data. Music is more fun, but this committee has been focusing in particular on news and information.
Senator Graham: You followed up your statement about the size of your audience, by saying that, as a result of your scope and commitment, you make significant financial contributions to the development of Canadian musical talent and talent-developed initiatives. How do you do that? Can you give us an idea of the magnitude of those financial contributions?
Ms. McNair: The CRTC benefits, as part of our acquisition of stations, we have made a commitment to a number of benefit initiatives and that totals $27.5 million. Each year, our stations contribute, as a minimum, $420,000 to Canadian talent development initiatives. Those initiatives are defined by the CRTC, so that the money must go to a third party. The third party must be involved in the creation of artistic or musical talent development. On top of that, in the communities that they serve, through public service announcements, PSAs, and local fundraising drives and sponsorship initiatives, we have estimated that each year our stations contribute approximately $31 million to those initiatives.
Senator Graham: I am also interested in your phone-in shows, which you say encourage listener discussion and debate and a range of opinions.
In my view, some phone-in shows in my home area of Nova Scotia, here in Ottawa, and indeed elsewhere, can become very biased and slanted. Are your hosts given editorial freedom? Do they try to be like the sports broadcaster who favours one team but, in the description of the game, tell it as they see it and are not biased?
Mr. Cassaday: Our direction to our hosts is that they provide balanced programming. One of the things that Mr. Hayes has talked to them about is having both sides on a show at the same time. That is when the sparks really fly in radio.
However, when it is a straight call-in show, as opposed to a show with guests, you will get people calling to espouse their views, and that is where the host has the responsibility to ensure that he or she is acting responsibly in filtering the callers' views and certainly censuring the caller if it involves issues of racism or worse.
Senator Graham: So you attempt to get as much balance as possible?
Mr. Cassaday: Yes. The key is to have responsible program directors and news directors who understand their responsibilities and monitor these shows on a regular basis.
Senator Graham: I notice that you gave voice to the debate on the Kyoto Protocol, which is very good. Would that have been a one-hour or two-hour segment, or would it have ranged over a period of time?
Also, was Iraq covered, a question that had been of interest to all Canadians?
What is the role of news on radio today and has that role changed over the past five, 10 or 15 years? Do you think that radio news may have a greater impact on youth than news on other media? Do you believe that you have, with your broadcast licence, a responsibility not only for entertainment but also for education, which I regard as very important? I am talking about educating the people and, most particularly, our young people.
Mr. Cassaday: I will let Mr. Hayes share with you what he and his group were able to do on Iraq. I will deal with the Kyoto question first, because it is quick and easy, and then talk about responsibility.
In the cases of Kyoto, we found that it was a very contentious issue that no one was dealing with, so we set up a forum among our stations across the country. We did from one-hour to three-hour shows over the course of a week, starting in Vancouver. We used Rutherford in Edmonton, Adler in Winnipeg and Roy Green in Hamilton. We had hosts alternating across the region by week and we networked it across the country so that Canadians were able to get a good understanding of this issue respecting the regional differences on an issue like this, which involved oil and the environment. Clearly, Canadians in Alberta felt differently about Kyoto than did Canadians in Ontario.
That is an example of how we were able to use the collective clout of our system to create a network around an issue like Kyoto.
In the broader question that you asked about our social responsibility to educate young Canadians, I think that our responsibility is to inform Canadians. I do not really think we have a responsibility on our radio stations to educate Canadians. In the case of Treehouse and Discovery Kids, we have a responsibility to educate, because that is the format of those services. If we tried to educate people on our EDGE radio station or our Power radio station in Edmonton, they would leave us. However, we do believe it is important that we provide them with regular news coverage. On our news talk stations, which tend to have older listeners, we are providing a lot of diversity of opinion. However, on our rock stations we provide the opportunity to hear our personalities talk about the issues today in a language that young people are comfortable with. We do not view it as our responsibility to educate young people on our radio stations.
Mr. Hayes: You asked about Iraq as well?
Senator Graham: Yes, just as an example of another major topic that faced the nation, particularly since Canada took a different position than our friends to the south thought we should have taken.
Mr. Hayes: We covered the news of the invasion of Iraq quite extensively. In fact, we used international correspondents and local connections between our stations so that the impact to Vancouver could be shared with Edmonton, Calgary, Toronto and Montreal, and vice versa.
You might remember that the war itself was a very quick event. The ongoing coverage that we have given Iraq has been mostly with news updates but also in the context of our talk programs. Those are the lengthy shows that feature call-ins and opinions from listeners.
Talk programming is generally not for the faint of heart. It is a very challenging format. When it does it best, it reflects a variety of opinions. I find myself sometimes amused and delighted and then angered beyond belief within the same five minutes.
Senator Carney: You must be talking about the recently departed Rafe Mair.
Mr. Hayes: I am talking about a number of our talk show hosts and their listeners and frequent callers. You get a lot of opinions and, again, it is not for the faint of heart.
We make a sincere and ongoing attempt to be fair and balanced. Our program directors realize that some of our hosts may have a particular opinion that may exhibit itself during the course of a discussion, but they balance that with the next show host in the following program who may have a different kind of vent.
As Mr. Cassaday said, we try, whenever possible, to get both sides of an issue in the studio at the same time. It not only makes for good radio, it also allows the listener to hear both sides of a discussion at one time. Many stations may take the right side of an issue on a Tuesday and then present the left side on a Thursday, but we find that the audience reacts much better and that it is much more educational and balanced when both points of view are presented at the same time.
I am very proud that Corus has five annual business objectives within the company. Three are related to the business of operating the station and two are related to training and development and community service. We include community service, which is serving our local communities and reacting instantly to the needs and interests of those communities, as well as adherence to the condition of our licences and standards of broadcast content of the Canadian Broadcast Standards Council, CBSC. We include this as an annual objective for all our station managers and employees in the radio station so that it is forefront. It is something that everyone can discuss and focus on at the beginning of a fiscal year and make plans and preparations to ensure that we do what we said we would do and that we do sincerely serve the communities.
There is a moral compass within Corus radio that we seek to leave the community a better place for our having been there. This is something that is part of our annual business plan and our quarterly review. These are questions that I am asked personally when I visit our stations all across Canada: What have you done lately for the community?
Senator Corbin: With reference to the statement on page two that you are in partnership with the CBC and National Film Board for a documentary channel, how does that work?
Mr. Cassaday: We are the operating partner in this company so we are responsible for programming the service, originating the service, and selling and collecting the revenues.
The CBC and the National Film Board are partners in that they provide programming. The CBC has a rich library of documentary as does the National Film Board. Both of them have important input on the programming and the overall look and feel of the network.
Senator Corbin: Is it basically archival material?
Mr. Cassaday: Yes. We do originate documentaries but the majority of the services are archival.
Senator Corbin: If I understand correctly, you do not have any operations or associations east of Montreal?
Mr. Cassaday: We have radio stations east of Montreal. We have radio stations in Drummondville, Amqui, Montmagny, in the Laurentians and two radio stations in Rimouski.
Senator Corbin: Anything in the Atlantic Provinces?
Mr. Cassaday: No, we do not at this point in time but we would like to be there in the future.
Senator Corbin: I would not resist that, considering the local situation in some provinces. You state on page 11 that your stations provide $30 million in support each year to local charities and community events. How do you come to that figure? In other words, how do you price that contribution?
Mr. Cassaday: We started to record all the commitments that we make to public service announcements. We value them at our rate card. What would it cost if someone bought that level of service?
Senator Corbin: Depending on what time of day or on the weekend?
Mr. Cassaday: That is right.
Senator Corbin: That is the rate that is supplied?
Mr. Cassaday: That is correct.
Senator Corbin: How do you deal with complaints? I suppose you have received complaints from viewers or complaints inside your various shops. Could you tell us how you deal with them?
Ms. McNair: If it is just a listener who calls or sends an e-mail to the station, it is dealt with by the local station. However, there is also a procedure where, if someone forwards a complaint to the CRTC or the Canadian Broadcast Standards Council, CBSC, it becomes a much more formal procedure.
The complaint is forwarded to us. We have 21 days in which to respond and we provide a written response. If the complainant is not satisfied with our response, they can ask for a ruling request from the CBSC panel as to whether or not we violated a programming code.
On the television side, YTV has a viewers' relations department and they respond to complaints or questions or comments as well.
Senator Corbin: Are your various workers unionized?
Mr. Cassaday: A small percentage of our operation is unionized. We have unions in Peterborough, Kingston and Oshawa. The majority of our operation is non-union.
Senator Corbin: With respect to the Kyoto programming, have you done any analysis of the responses and have you attempted to come to some conclusions? Would that kind of analysis be available? Would you normally do that sort of thing is what I am asking, with respects to any public issue?
Mr. Cassaday: This is the first time that we have ever actually strung our system together in kind of a network-type format for an issue of that nature. Obviously there are network opportunities. We will carry the Grey Cup in a couple of weeks as a network but, generally speaking, radio is local and we want to deal with local issues discussed by local personalities. We find that when we try to syndicate programs across the country, we minimize our effectiveness.
In terms of answering your question: Do we know specifically whether we struck a cord with Kyoto? The answer is, not really. In radio we get a report card three times a year in most markets, a small fall, spring and summer book. That tells us whether or not we are ringing the bell with our listeners across the country. They vote in diaries three times a year and give us a good reflection as to whether or not they think we are doing our jobs well.
Senator Corbin: On page 18 of your brief, you make the statement, ``The consolidation is a result of the increasing fragmentation of audiences due to the sheer abundance of choices available to consumers.''
Are we about to reach a saturation point with respect to what listeners can take, or are new markets continuing to expand all the time? I turn on my TV. I hear the radio. I look at the abundance of newspapers. I appreciate that you are trying to reach local markets but it would seem to me that the sheer abundance would lead one to believe that saturation is at hand.
Mr. Cassaday: We do not share that view. What we have seen happen in media is that it has gone from general interest to sort of variations on that theme. It is evolving to specialties or verticals.
In the future you will see the Speed Channel evolve to a channel that only deals with motorcycle racing, another with speedboat racing and another with racecars. We are seeing that degree of segmentation in music. Much Music started out. It was then segmented into country. We had a jazz channel launch last week. We will soon see a classical channel. I believe that what we will see happen in the future is increasing more segmentation, highly specialized to specific areas of viewers and listeners.
Senator Corbin: You said that you need reforms to the Copyright Act. What kind of reforms are you looking at or requesting specifically as it affects your media?
Ms. McNair: One of the reforms that we would like to see happen on an expedited basis is an express ephemeral right. An ephemeral right is a right for a broadcaster to make a temporary recording to facilitate the communication of the work to the public.
This was introduced in 1997 with the major amendments to the Copyright Act but there was an exception to that right so that if there was a collective established and proposed royalties for that limited reproduction right, that was permitted under the act.
Recently, there are two collectives that filed tariffs with the copyright board and the copyright board determined that it was appropriate that radio stations pay .8 per cent of their revenues for this temporary reproduction right which we do not think is reflective of what Parliament intended in the 1997 amendments.
Right now, there is a section 92 review of the Copyright Act that was undertaken by the Standing Committee on Canadian Heritage in the House of Commons. The legislative review is a three-stage process. Ephemeral rights they have proposed would be looked at in the third stage and we want it looked at immediately.
Of the other countries that we are aware of — Finland, Sweden, the U.S. — most nations have an expressed ephemeral right for broadcasters and we do not have that in Canada.
Senator Corbin: You mentioned the foreign situation. Who, in your opinion, has the best proposal in respect to the copyright regime?
Ms. McNair: It is difficult to say. There is quite a distinction between the U.S. model and the European model. Canada has evolved to being a hybrid between the two. We have probably adopted more of a United Kingdom model. In the U.S. they do not recognize a number of rights that we recognize under our legislation.
The copyright fees paid in the U.S. tend to be much lower than the tariffs established in Canada. That makes it difficult for our radio operations. We have a number of additional costs that our friends south of the border would not have. Our CRTC licence fees are much higher than what a U.S. broadcaster would pay to the FCC and our copyright payments are significant. For our company alone, our payments are over $11 million a year.
The Chairman: On radio, if the numbers I have are accurate, you have almost as great a proportion of the Canadian market as Clear Channel has of the American market. However, you seem to have adopted a diametrically opposed corporate strategy. I assume that Clear Channel is raking in megabucks by stripping out huge amounts of local programming and doing it all centrally. You have spent much of your time today talking about how the core of your business is to be local, to cover local things, to provide local information and talk shows. I do not know about local music.
Why do you do that? Is it because Canada is different or the CRTC made you do it? It surely would have been easier to make the megabucks from one central studio.
Mr. Cassaday: Mr. Hayes actually owned his own radio broadcasting group in the United States. He has had a chance to work in both systems. I will let him talk to this subject as well.
The simple answer to your question is that Canada is different. The CRTC is not imposing regulations on us that would prohibit us, but in Canada, the bulk of the radio business is done in the top 10 major markets. Those markets are our bread and butter. Clear Channel is obviously in many major markets in the United States, but they are also in many small markets. In many cases, they also own more than four radio stations in a market. They have felt, strategically, that it is important that they do more voice work and automation in the radio stations than we have.
To maximize our effectiveness in the markets that matter, we feel that we have to be local. It is a conscious strategy that you are absolutely correct in saying is quite different than that used by Clear Channel in the United States. The reason for that is that Canada is a different market than the United States because of the concentration of our population in 10 major markets.
Mr. Hayes: Clear Channel owns 1,200 radio stations in the U.S. and we own 50 in Canada. The scale of their operation is massive compared to ours.
There is a fundamental difference in the way we approach things. That is, we have a more decentralized management structure that is focused on local management, hiring and retaining the best local managers that we can find, giving them autonomy, accountability and responsibility for the business and also to serve the needs and interests of the local community.
When consolidation took place in the U.S., I was an observer. I sold my company to Infinity. They are close cousins to Clear Channel. I was able to observe from the grandstand. What happened within those companies is they tried to create a new business model. I hope I was able to learn from it. Many mistakes were made not only in terms of mistakes for the business, but also mistakes as to employees, advertisers and local communities. Frequently, the end result was that the investor suffered. All of the constituencies that can be affected by a local business were affected, sometimes not in a positive way, by the fits and throes of consolidation in the U.S.
Mr. Cassaday and others in our company certainly have had a sense that something went wrong in the consolidation process in the U.S. We were committed not to repeat some of the mistakes in Canada and I believe we have avoided them.
The Chairman: What is your working relationship with Shaw? I know your corporate relationship, but are there joint corporate strategies or is there a coordination of programming in any way? How does it work?
Mr. Cassaday: We are a totally separate company. We are structurally separate. The executive chair of our company is Heather Shaw, the daughter of J.R. Shaw. Heather's sister Julie is also on our board. There are no cross- directorships or cross-management personnel.
Shaw, most importantly to us, is our single largest customer because our strength is so much in the west. As the major distributor of programming in the West, they are our largest player. We have no relationship as it relates to strategic planning.
J.R. Shaw, who controls both of these companies, treats them as two entirely separate entities. He did that for two reasons. First, at the time of the spinout, it made sense from a structural point of view to have a separate company so that we could participate in the consolidation of the programming industry in Canada. He also did it because he felt that their core expertise lay in cable. He saw a great opportunity on the entertainment or media side of the business. He felt that to maximize the opportunity for his family and shareholders he needed to operate the entertainment business in an entirely separate manner with separate management.
Senator Carney: We have heard about local management and local focus. What happened when you bought the Women's Network? As I recall from reading the newspapers, that was headquartered in Winnipeg. After you bought it, it was moved from Winnipeg to Toronto. We heard that many of the staff in Winnipeg were terminated for one reason or another, such as inability to move to Toronto or lack of job opportunities.
For the record, can you tell us what happened with the Women's Network and what is the status of it today?
Mr. Cassaday: We believe that the W Network was underserving its audience because it was isolated as a standalone television station. Wherever it was located did not matter. The fact of the matter was that it did not have the protective cover of a cluster of television stations so that it could take advantage of some of the operational efficiencies of a combined sales force, accounting department, and so on.
We moved WTN to Toronto. We rebranded the service as the W Network. We have transformed that television network from being the fourth most-watched television service for women to the number one television service for women. We have increased the ratings by over 60 per cent since we took control of it. Just because it was located in Winnipeg and just because it was operated by that group of people did not mean that it could not operate better. We have proven that we are serving the women's audience much better than in the past.
I think it was merely a coincidence that Corus was located in Toronto. Had Corus been in Winnipeg, WTN would have stayed in Winnipeg, but it would have been tucked into the other programming group that we had.
Senator Carney: Your argument is inconsistent with the one you use for local programming with radio stations. I am aware of the approach for sales and management with television properties, and you certainly do that with radio properties, yet they operate in local markets, so I do not understand.
Mr. Cassaday: However, WTN is not a local television network. It was a national network, so there was no need for local Winnipeg management, because the role of WTN is not to serve the women of Winnipeg but to serve the women of Canada.
Senator Carney: As someone who lives in B.C., I watched it a lot, and I certainly did not live in Winnipeg.
Mr. Cassaday: That is right; it is a national service. The other thing we did for people in B.C. was to introduce a separate feed so that the prime time programming in British Columbia now comes into British Columbia in prime time. This was another enhancement that was not affordable when it was owned and operated by the previous management group.
Senator Carney: I would like to ask you something about costs and I want to go back to the issue I raised before. This committee is looking at trends in communications. Your company is certainly an outstanding example of the trend, since it went, in a very few years, from 11 radio stations to 50 and Corus is seen by three out of every four Canadian cable television viewers.
You are a company with the Shaw affiliation, which is in the media business, with radio and television and digital channels. With Shaw you are also in the satellite distribution business and the cable business. That corporate group covers everything from radio-television to distribution.
You are not in the print business and I would be interested in a comment on why, because specialty channels require content and one easy way to get content is from print properties.
We can look at the proliferation of channels, the growth of specialty channels, as you have described, and the trend toward video-on-demand, news-on-demand and all-news radio, where the audience is making the choice about what it wants to see or hear, when and on what type of channel. The fact is that the advertising market itself is still fairly constant, so the only way you can get the additional revenues is through fee increases. There is only so much of a pie from advertisers, and with the consolidation of companies there are fewer and fewer major national advertisers. You are going to more and more specialty channels, competing more and more for viewers, and the only place I can see extra funding coming from is fee increases to the consumer.
At my island home, I get StarChoice, which is one of the Shaw properties. My fees have increased substantially over the last four years, about the same time frame as your growth. Yet, in my town office I am on Shaw cable and my fees have increased substantially over the last few years. Those are CRTC-mandated increases in some cases.
How much will the consumer who wants this diversity of choice and wants the ability to access news and music on demand pay for that choice?
Mr. Cassaday: First, to reinforce that Corus is a structurally separate company from Shaw, we have zero influence on, and zero input into, any decisions made on pricing, packaging, distribution or bundling by StarChoice or by Shaw Communications. They are totally separate.
Second, we believe — and our strategic plan points to it — that the major source of our growth will be through advertising revenue and not through subscriber growth, as you are suggesting. We believe that radio markets in Canada have the potential to continue to grow in the 3 to 4 per cent range. We believe that historically advertising growth in Canada has paced 1 to 2 per cent ahead of GDP and we are confident that this country will continue to show positive growth in its gross domestic product.
The fact is that YTV has been on the air for over 10 years and has never had an increase in subscriber rate. WTN has been on the air for approximately seven years and has never had an increase in its subscriber rate. Teletoon has been on the air for seven years and has never had an increase in its subscriber rate. Movie Central has in fact had its subscriber rate reduced since its inception, so we have not benefited one nickel from increased subscriber revenue.
Where our subscriber revenues have grown, it has simply been through the expansion of penetration in Canada. Satellite offered us access to uncabled areas or poorly serviced cable areas, so that represented new opportunities for us, many of which were in digital.
As the consumer goes forward, they will have choices to make. They will have to decide: Do I want high-definition television? Do I want video-on-demand? Do I want more digital channels? Yes, they will pay for those because they are getting more service, but they also have the opportunity to take a basic cable package or a basic package on satellite and contain their costs if they want. However, I think that at some point in time you will have the opportunity to do your grocery shopping through broadband on your cable, and that will be your choice.
Senator Carney: I am not suggesting that this is wrong. I made it very clear that if the consumer wants and demands this proliferation of choices, they have to pay for it.
Mr. Cassaday: That is right.
Senator Carney: However, I know that in my household the combination of telecommunications, cable and satellite is the biggest single item in our budget. This includes telephones, mobile phones, Internet services, cable services and satellite services. All together it is a huge component of the household budget, which is the choice that my household has made, as have other Canadian households.
Have you any projections of how much that choice will cost consumers? I am not saying it is good or bad; I am simply asking whether you have any projections of what it will cost. I have no evidence, although perhaps you do, that the growth in the advertising market and the GDP will finance this.
Have you any projection of how much this choice will cost consumers?
Mr. Cassaday: We are seeing that certain segments, such as local telephony, are basically flat right now. I do not think that operators such as Bell are anticipating much growth in that area, but they are anticipating tremendous growth in wireless. I think that we will see continued growth there. The consumer is indicating perhaps not an insatiable appetite for new services, but certainly an extraordinary one. They appreciate the convenience of wireless telephony; they appreciate the benefit of broadband access and they seem to be willing to pay for it at this time.
I suspect that they are making certain tradeoffs. Those tradeoffs may be one less dinner out a week or one less movie out a month in exchange for the conveniences that are being offered to them.
I do not know what percentage of their income it will represent, but I do know that in a recent study Price Waterhouse Coopers predicted, looking at all the entertainment economies in the world, that Canada would be the fastest growing one over the next seven years.
I would point the committee to that study, which basically breaks down all the components of the entertainment economy into their component parts and predicts, as I said, that Canada would be the leading growth nation amongst the G7 or G8 nations, through the period to 2007.
Senator Carney: Could you provide us with the Price Waterhouse Coopers study, or direct us to where we can get it?
Mr. Cassaday: I can certainly make you aware of it. It is probably a study that we cannot copy, but I will make the chairperson aware of the study and you can make a decision on that.
Senator Spivak: I will be very short. I want to ask you about ``kid-fluence'' and the targeting of advertising toward children. I understand that in Quebec, that cannot be done. I understand from an article supplied to us that the ``kid- fluence'' strategy is your new push. ``Kid-fluence'' involves getting kids to pester their parents. It is commercializing the media to a degree that is pretty reprehensible. How do you justify doing this?
Mr. Robertson: All we do with respect to advertising and programming on our kids' channels is totally within the code of kids for broadcasting. At no time would we ever recommend anything outside of existing legislation and guidelines, which are through the CAB and the CRTC.
It is important to note that Canada has very democratic households. The kids want to be heard within the household, and parents encourage that dialogue. We found through our research that kids do have a major say in terms of purchases the family makes. For example, the kids have a say in what type of minivan the parents might buy. If, indeed, parents wish their children to have a say and the children want to have a say, then they will be heard.
Our approach is to recognize that children do have a point of view in the household, and if they are interested in products and they are part of a family decision, to advertise to them is an appropriate thing to do.
Senator Spivak: I do not want to be too harsh, but I believe that there is a difference between kids having a say, and advertising that makes them want things that they never thought of wanting. In other words, advertising is meant to make people feel they need something that they would never think of otherwise. In the real world, businesses have to advertise to adults. However, must they advertise to kids? I do not think you can justify your strategy on the basis of democracy in a family, with all due respect.
Your company is great. You have wonderful programs. I watch YTV myself.
Even Harry Potter has become a commercial thing. What are we doing in our world, commercializing every last thing?
Mr. Robertson: It is certainly a point of view.
Senator Spivak: If you want to know what I really think, I will tell you.
Mr. Robertson: We appreciate your point of view on this. Canada is respected around the world for the safeguards that are put into place for kids' advertising. We are the only country in the world that is totally commercial-free for all preschoolers. We recognize that very young children should not have advertising directed to them. Also, there are other safeguards. There is no advertising that tells a child to go to purchase. It all has to do with information about the product, rather than directly soliciting.
There are several other ways that the industry takes care to make sure the children are appropriately dealt with, with respect to communication. Many countries ask us how we do it. The U.S. has no commercial restrictions on kid advertisement. Canada is very well respected around the world for this.
Senator Spivak: In other words, you justify this in principle. Are you saying there is nothing wrong with this?
Mr. Robertson: There is nothing wrong with advertising to children. With proper safeguards, we believe it is appropriate.
Senator Graham: Honourable senators, I want to go back to one of the comments made with respect to getting the news out to local people and informing them.
You made reference that, once a week, Premier Gary Doer comes right in to CJOB to take listeners' phone calls on the air. I am wondering if, in the interest of balance, you invite other party leaders and spokespersons to come in and do the same from time to time?
Mr. Hayes: Yes, absolutely.
Senator Graham: In your sum-up, you were talking about things the government, meaning the Government of Canada, might do. You say you need support in the form of stable funding for the Canadian Television Fund. Could you elaborate?
Mr. Cassaday: Currently, the government allocates — this year $75 million — towards the production of Canadian television programming. In the past, there was a fund of $100 million. The funds are also supplemented by funds from the cable television industry. We believe that those funds have been instrumental in triggering significant amounts of production on all of our services and that the absence of that funding would result in a significant diminution in both the quality and quantity of Canadian programming available.
Senator Graham: Is its purpose to develop Canadian talent?
Mr. Cassaday: That is correct. The qualification for the CTF is a criterion based on encouraging the development of Canadian content in various genres, including drama, children's programming, documentaries and lifestyle programming.
Senator Graham: Has that funding been cut?
Mr. Cassaday: That funding was curtailed this past year, but the government did make a two-year commitment to it. They have not committed beyond that, and we are encouraging them to do so on a go-forward basis.
Senator Graham: The second year of that two-year commitment is when?
Mr. Cassaday: We are in it now.
Ms. McNair: They have committed into 2004.
Senator Merchant: I understand that you are in business to make money, of course. Everybody is. If you do the work, you should, of course, make money. We want you to make money.
It is a great coup for you for the CRTC to allow you to have as many radio stations as you have in the market, and also to manage other radio stations.
Is there a limit to the number of other stations in the same market that you can manage?
Ms. McNair: Yes. The CRTC actually implemented a policy, by way of regulation, that you need prior approval from the commission to enter into a local management agreement. That would put you over the level of stations that you could own under their multiple licence ownership rules. While there is a possibility for you to enter into a sales relationship with other stations, you cannot manage other stations in the market without prior CRTC approval.
Senator Merchant: When you say ``sales,'' do you mean advertising sales?
Ms. McNair: Yes.
Senator Merchant: Persons in the community who have businesses may want to advertise. If you control such a big share of the market, is it not then likely that your advertising rates will go up? When there were different stations competing for the advertising dollar, someone could charge $50 but somebody else might charge only $25 in order to attract some advertisers. When you are controlling the sales, you are pretty well charging top dollar to the advertisers. You can do that because there is no competitive edge any more. There is no competition there for you. How is that serving the public?
Mr. Cassaday: There is competition and there are safeguards. For example, a local advertiser in a market like Winnipeg has a number of alternatives. They can buy local television or local radio, even in a concentrated grouping. They can buy out of home, bus shelters, bus transit or newspaper. They have a wealth of local options that serve to keep the market in check.
If radio thought it could price in isolation of competitive mediums, there might be an issue. The reality, however, is that we cannot price in isolation. We have to price in context with other local competitors in the marketplace.
Senator Merchant: What I am trying to say is that that particular business may not be able to advertise on radio any longer. They may have all kinds of other options, but that one option has been taken away from them. I know they have many options, but they no longer have the option of advertising on radio because it is more than they can afford to pay.
Mr. Hayes: This was a fear that existed at the time the consolidation took place. I can tell you that, in practice — I am only being half facetious when I say ``much to my dismay'' — the difference between having eight owners versus three or four owners of radio stations in a market has not influenced the amount of inventory for commercial radio, that is, the supply. The three owners in a marketplace, as opposed to eight owners, are just as competitive for advertising sponsorship as previously.
Thus, in most of our markets, we have not seen an increase in rates. In fact, in Vancouver, our rates have been stable over the last couple of years. In Winnipeg, the rates are only slightly higher, which is more reflective of the growth that Mr. Cassaday indicated before, perhaps 3 to 4 per cent year on year.
You must recognize that most of the sales that we make and the revenue we derive are being driven by a small handful of major advertising agencies in Canada that are global in nature. They control a lot of clients and a lot of placement of radio ads. They are tough on rate and value-added components to an ad campaign, including contests, promotions, trips and give-aways that provide them added exposure. At the end of the day, if you were to survey these agencies and the buyers, you would hear a vast majority say that radio is a cost-effective and efficient medium, not only compared with other media but also compared with what the cost in radio has been historically.
The Chairman: How many journalists do you employ? Let me stress here that I would draw a distinction between talk-show hosts and journalists in the normal way of things. I appreciate there may be times when it overlaps but, by and large, they are two different crafts, with different priorities and imperatives.
How many of those work at your all-news stations, leaving how many others to be spread across your other properties? Do you have that information or can you get that for us?
Mr. Cassaday: We can get that for you. Charles Adler may wonder which category he fits into, and that may be the most difficult challenge in your question. We will do the best we can.
The Chairman: I appreciate that there are times when it goes like this. Nonetheless, you can appreciate the general distinction between the two classes.
Mr. Cassaday: I understand.
Senator Carney: I want to say for the record, because some of us do not agree with your distinction that, last week, Rafe Mair won the Bruce Hutchison award for outstanding journalism, and he is a talk-show host.
The Chairman: In my way of thinking, he would be an example of that point where there is a cross-over. However, when you think of Howard Stern, to pick a non-Canadian example, somewhere along the line —
Mr. Cassaday: Senator Carney's distinction has helped. We can certainly accommodate that and make that distinction.
The Chairman: Second, Mr. Cassaday, you have said, not so much here but recently in public, that in the next 12 to 24 months you are expecting a big new wave of media consolidation. Can you tell me more about what it is that you are expecting?
Mr. Cassaday: As a result of the fragmentation in the marketplace, we believe that we will see further clustering of television and radio networks in Canada. We believe that the catalyst for that will be the disposition of the Bell Globemedia assets by BCE, which they have announced publicly. That will create a tremendous amount of activity in the marketplace, resulting in alliances being created.
How far it will go, Madam Chair, I do not know. I do believe that we will see various family companies consider their options going forward. Do they want to step up and become bigger players, or will the next 24 to 36 months be the time that they choose to exit the industry?
The Chairman: Do you have plans? I realize you cannot tell us the fine details.
Mr. Cassaday: Yes. As a management team, we believe that we need to become stronger at home to compete successfully internationally. We acquired Nelvana for the express purpose of having a library so that we could take our expertise in programming to children into markets outside Canada. Recently, we acquired a television network in Latin America, at a most difficult time in the Latin American economy. However, we have been unable or unwilling to go further in that regard, until we get ourselves fully entrenched and our position in Canada solidified. Michael Porter, the noted strategist, talks about the importance of competing successfully at home before you can compete successfully abroad. We believe that while we can be a global player in that specific area of children's programming we need to have further solidified our position domestically.
The Chairman: Would you be interested in moving into print?
Mr. Cassaday: That would not be at the top of our list of priorities. Our view is that the print medium will be one of the slower growth media in the future. We also believe that the classified ad section, which is certainly the dominant revenue producer for the print medium, is the most vulnerable to the Internet. Those are the two principal reasons why, when in the past presented with the opportunity to enter the print area, we have chosen not to do so.
The Chairman: Within the sectors where you do see growth for yourselves, what do you think should be the principles, if any, determining how big a company, be it yourselves, or others, can become in Canada?
Mr. Cassaday: I believe that we have to make a decision in Canada as to whether or not we want to create strong Canadian media companies, or whether we want to create companies that are vulnerable to international acquisition. As Canadians, our preference is that we allow the creation of strong Canadian media companies.
The Chairman: How big do you have to be to be strong?
Mr. Cassaday: For example, Viacom, which is a United States company, is a company that is vertically integrated in the production of content. They own radio stations, specialty television networks, and outdoor and local or conventional television operations. I think they are seen as a good corporate citizen, an excellent investment opportunity in the United States. It is a difficult question to answer in terms of the precise size.
I certainly think that if Corus were twice the size it is today, it would not be too large a company to continue to serve Canadians well and ensure that there was still competition within the segments that we compete. Even if we increase the size of our radio operation by a third, there would still be significant competition in Canada in radio. If we decided to increase our specialty television operation we would be moving into genres that we are not currently in. We would move beyond children, in W, perhaps into the sports genre. These are growth opportunities for us that do not increase our dominance within a particular segment.
The Chairman: I could ask you another hour's worth of questions but it has been an interesting segment.
Senator Graham: With all this talk of growth and expansion, it occurred to me that I will be leaving this place sometime next year and I may be looking for a new challenge. I know that Senator Carney would be anxious to recommend me as an unbiased talk show host, particularly on youth television.
Senator Carney: I wish to comment that in terms of the committee the last comments that were made about integration are probably the most critical and crucial of what we have before us in this committee. Basically, the integration of the industry will be the future of the industry. Your own growth and growth of your competitors are evidence of that.
Will you call representatives from Bell and some of the other companies before the committee? We would like to know what they are doing.
I would like to congratulate you on the candour of your answers in a highly competitive field.
Mr. Cassaday: We appreciate your interest.
The Chairman: Indeed, it has been a most interesting session. Thank you very much.
The committee adjourned.