Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 8 - Evidence - February 20, 2007
OTTAWA, Tuesday, February 20, 2007
The Standing Senate Committee on Transport and Communications met this day at 9:32 a.m. to examine and report on the objectives, operation and governance of the Canadian Television Fund.
Senator Lise Bacon (Chairman) in the chair.
[English]
The Chairman: I call the meeting to order. Today we have on our agenda to examine and report on the objectives, operation and governance of the Canadian Television Fund. As our witnesses, we have from the Canadian Television Fund, Mr. Barrett, Chairman of the Board. Ms. Creighton, President, Mr. Cardin, Vice-President, strategic planning and stakeholders relations, Mr. Carter, member of the board of directors, Ms. Mirsky, member of the board of directors, and Ms. Corcoran, Director of Research. Welcome to our committee.
[Translation]
Douglas Barrett, Chairman of the Board, Canadian Television Fund: Thank you, Madam Chairman, for your invitation to appear before the Committee today. You have already introduced all of our members.
[English]
I would like to indicate that Ms. Mirsky, in addition to being a long time board member, has been Executive Director of the fund for 10 to 12 years and is a great supporter.
Mr. Carter was for a number of years the President of TQS Quebec. When he retired from that position, he was nominated to our board as an independent board member and serves in that capacity.
[Translation]
He has served as chairman of our finance committee for several years. He is now its vice-chairman.
[English]
Members of the committee, thank you for giving us the opportunity to appear before you this morning. Over the past few weeks, there has been much attention paid to the Canadian Television Fund. It has been said on a couple of occasions that the fund is a broken institution. Clearly, we do not agree with that statement.
There have been calls for a complete restructure of who we are and what we do. As a practical matter, we feel the fund is a well governed and managed institution. It is effective in both program delivery and administration. It manages a significant amount of public and private funding to the highest degree of fiduciary standards, and operates under guidelines and objectives contractually imposed by Canadian Heritage through our contribution agreement.
Our financial and program results are subject to close scrutiny and it has been confirmed that in its periodic examinations and independent reviews the CTF is performing well.
Numerous parties with differing interests make up the television industry. Approximately 10 overriding policy objectives govern CTF operations via the contribution agreement. Fortunately, we do not have to have all of our board meetings in the midst of a construction site, although it has happened from time to time.
Satisfying all parties and enacting the defined policy direction can be complex, requiring business expertise and strong governance. A 20-member board of directors governs the CTF, bringing together the best the television industry has to offer and represents numerous stakeholder groups.
The Department of Canadian Heritage is the largest nominating body to our board of directors with five seats. Six of our directors are legally determined to be independent and have no commercial connection with the television business. Until recently, senior officers from both Shaw Communications Inc. and Quebecor Media Inc. have participated on the CTF board.
Strict rules govern conflict of interest practices. We have a permanent independent committee, comprised of all of our independent directors, who supervise and monitor an extensive conflict of interest policy. By the way, we see that one of the primary cornerstones of CTF is its ability to operate independent of commercial interests. Most importantly, a double majority of the independent board members and of the remaining stakeholder board members must pass all of the boards' substantive policy and financial decisions.
Valerie Creighton, President, Canadian Television Fund: The Canadian Television Fund is the largest funding source of television production in Canada after the tax credits. In 2005-06, the CTF invested more than $249 million in Canadian production, creating 2,276 hours of quality new programming. During the past 10 years, the CTF has supported over 4,000 projects and contributed over $2.2 billion to the production of Canadian television. This triggered $7.4 billion in production budgets. This activity has generated more than 23,000 hours of Canadian content, delivered in prime time, to hundreds of millions of viewers. In 2004-05, the CTF distributed $251 million in funding, which supported $841million in production and generated an estimated 22,400 full-time jobs.
In terms of return on investment, the CTF is far reaching and impressive. In 2005-06, every dollar invested triggered $3.05 in production values. Those are made in every region of Canada, establishing both creative and technical professionalism throughout the country.
A rules-based program, including the market driven broadcaster performance envelopes, that we call BPEs and special initiatives, delivers CTF funding. In both of these programs, funds are paid directly to independent producers. The BPE program supports underrepresented genres on Canadian television in both official languages as well as Aboriginal languages. Prime time programs in the genres of drama, documentary, variety, performing arts, and children and youth programming are included.
In 2005-06, 65 broadcasters were allocated envelopes which in turn supported 383 new productions. Special initiative programs support development of French language productions outside of Quebec, Aboriginal language productions, and versioning into other languages.
Kathy Corcoran, Director of Research, Canadian Television Fund: Despite an increasingly competitive environment, several Canadian programs have received more profile and attention than ever before, including many programs funded by the CTF. Little Mosque on the Prairie recently premiered on CBC with an average audience of over 2 million viewers. Subsequent airings of the program have stabilized with more than 1 million viewers each telecast.
Degrassi: The Next Generation, is a cult hit in Canada and the U.S., amongst teens and is near syndication in the U.S. Da Vinci's Inquest, currently in syndication in the U.S., draws 3 to 4 million viewers per week often winning its time period, and has now aired in over 100 countries.
In the category of children and youth programming, nine of the top 50 programs for children 2 to eleven years of age, are funded by the CTF.
[Translation]
Stéphane Cardin, Vice-President, Strategic Planning and Stakeholder Relations, Canadian Television Fund: Madam Chairman, due to lesser competition from American sources and less fragmentation of audiences, the Quebec market has had tremendous success with its domestically produced content. The CTF continues to play a very important role in sustaining the dominant position of Canadian produced content in this market. Based on viewers aged two and up, 10 out of the top 25 regularly scheduled programs in the Quebec francophone market were funded by the CTF, including Le cœur a ses raisons, Annie et ses hommes and Casino.
Furthermore, several successful CTF funded French language productions have won international acclaim, such as Insectia or l'Odysée de l'espèce. Others have been successfully sold nationally or internationally as formats, including Le coeur a ses raisons, Rumeurs and Un gars, une fille, which has been exported to more than 30 markets around the world and was the first Quebec television program to be adapted in the United States.
As for critical recognition, in 2005, almost half of the Gemini awards, 38 out of 75, went to productions funded by CTF. This includes, in the English language market, programs such as Making the Cut, The Eleventh Hour and Beethoven's Hair.
On the French language side, our productions have had even better critical acclaim. Almost two thirds of the Gémeau awards, or 48 out of 74, were given to productions funded by CTF, including Annie et ses hommes, Rumeurs and Ramdam.
Michel Carter, Member of the Board of Directors, Canadian Television Fund: Timely and consistent funding is crucial to the operation of the CTF and its ability to support the Canadian television production community as mandated and required. As such, it has been the practise of broadcasting distribution enterprises to make monthly contributions to the CTF, as per CRTC circular 427.
The entire CTF financing model is based on monthly cash flow injections from BDUs and payments from the Department of Canadian Heritage, combined with reserves and other contributions. CTF payments to producers happen throughout the year, according to the guidelines, and are critical to develop, maintain and complete Canadian productions. The recent announcement of Vidéotron to resume monthly payments is welcome news.
Furthermore, Mr. Shaw indicated this morning before the Standing Committee on Heritage that he too would resume his monthly payments. However, the impact of withholding CTF contributions by Shaw Communications continues to have a potentially devastating impact on the Canadian production community, especially as April to September is the traditional production cycle and broadcast cycles which require new Canadian content begin in September.
Deeply concerned about the industry's ability to manage a dramatic reduction at this critical time, the board has approved a financial plan that will enable the CTF to maintain financial support to all eligible productions for the remainder of fiscal 2006-07, ending on March 31. This will ensure that all projects currently on application will continue to be processed and all genres will receive equitable treatment.
The following demonstrates the impact on the CTF's funding due to the reduction in funding by Shaw Communications.
Assuming a full loss of Shaw contributions in fiscal 2006-07, the anticipated funding reduction would be 46.5 million dollars for 2007-08, the deficit recovery from 2006-07 would be 4.5 million dollars for a net total loss of 51 million dollars in 2007-08. This is a significant reduction, representing a decrease of 21 per cent from CTF's 2006-07 budget level and it is estimated that it will result in a loss of 113 million dollars in production volume in the English market and of 54 million dollars in the French market, for a total loss of 167 million dollars. This will lead to the loss of several thousand jobs in all sectors of the film and television production industry.
[English]
Sen. Tkachuk: I got lost on the $51 million. Could you go back to that number?
Mr. Carter: There is a potential loss of financing for the CTF of $51 million for 2006-07. Since CTF is only one portion of the financing, the impact on total production is $167 million. It is a three and one half to one ratio.
[Translation]
What will be the impact on Canadian audiences, on independent producers and on broadcasters? The number of unsupported productions in the next fiscal year will be 52 English language productions and 43 French language productions.
[English]
Mr. Barrett: From the board's perspective, we think we have a pretty good story to tell. The board is made up of tremendously interesting, intelligent and experienced individuals. The job we do is very tough and complicated, but we think we do it fairly well.
Our sense is that the real issue before the committee, and before the country, is not the state or performance of the CTF. We understand that Shaw and Vidéotron have concerns about the fund and some of those concerns are well worth discussing. Some of the concerns are principled and some of them relate to their own commercial interests.
Since our beginning, the CTF has been required to make its decisions in a manner completely free from the overriding financial interests of any particular stakeholder, group or corporate interest. The board is structured so there is no control group. No single member, including the Government of Canada, has the ability to control the votes on the floor. The job is to address the issues that we face in the best interests of the broadcasting and production system as a whole and, indeed, in the interests of all Canadians.
The real question to be addressed in this challenging situation is how the appropriate structures for publicly supported television production in this country are to be designed, and by whom. Is it to be the government, its ministers and officials plus the mandated regulator, or is it to be private stakeholder groups with the financial levers that have the capacity to drive the debate?
We all understand the television landscape is changing and there are new challenges to face, particularly at the fund. I would say that on our board of 20 people, we have a dozen or more people who are at the leading edge of all of the intelligent thinking on these new developments. That is a story that has not been properly told.
The CTF welcomes working through these challenges with Canadian Heritage, with the minister and with all stakeholder groups, as we have in the past. This will surely involve change. Nevertheless, the CTF has proven itself an incredibly flexible and adaptive organization. It is an innovative and outstanding public policy instrument for the Government of Canada and all Canadians.
We have four recommendations that we made before the parliamentary committee, which I am happy to repeat here today. We have also brought along a fact package, which can also form the basis of questions. I can either give you the four recommendations or end the presentation here, as you wish.
The Chairman: Do you want to give it to us now? We have the fact sheet.
Mr. Barrett: Do you want me to cover off the recommendations?
The Chairman: Sure.
Senator Eyton: Whose recommendations are these?
Mr. Barrett: These are recommendations that come from the board of the fund. At one time or another, they all have been discussed by the board. We have had a strategic retreat recently and we feel comfortable that this would be a unanimous recommendation from our board.
Senator Eyton: Are these recent recommendations — within the last few weeks?
Mr. Barrett: As we go through each, I can identify the genealogy of some of them.
Senator Fox: Do Vidéotron and Shaw also subscribe to the recommendations?
Mr. Barrett: I would suggest they would not subscribe to the first recommendation. We have not had an opportunity to see what their comment might be on the second.
The Chairman: We will go through the lists, senators, and you will have the floor to ask questions.
Mr. Barrett: As has been written about in the press, there is an ambiguity in the CRTC regulator environment. For a dozen years, we have been receiving monthly payments from our broadcasting distribution undertakings, BDU, supporters. I do not think anyone appreciated that while the enforceable legal obligation was annual; the obligation to make monthly payments was less enforceable. We are recommending that the commission bake the monthly obligation into the regulations. I did not appreciated how important the monthly payments were to us. The entire cycle of television production in Canada occurs before the September/October payment date that normally comes up in an annual cycle. We are making that recommendation. With respect to your question, senator, that would be a recent view of the board because we have not been aware of its impact.
We see ourselves as an operating agency operating under a mandate from the Government of Canada, Canadian Heritage and a contract. In that contract there are overriding policy directives given to us. Those public policy directives are from the government and reflect the priority of the Government of Canada in the expenditure of the public funds.
Because the BDU community is also a supporter of the fund, we see a proper debate going on about the mandate of the fund at the level of the minister and the government among the various funding parties. We have a very detailed operational job to do, and we do not think any individual funder, including the government, should interfere in that job. We are delighted that over a decade the government has found that nice spot where it has given us the policy directions, audited our performance against those policy directions, and then left us alone to do our work in conjunction with our stakeholders.
We feel there is an opportunity for a real debate at the mandate level. We would welcome it among the funders and welcome an opportunity to participate in it. That is where we think is the appropriate place for the dialogue.
We have had a situation for many years in which at the outset of the fund there were three cable seats and no seats for the direct-to-home, DTH, providers. That is because the satellite industry was not in existence. As the satellite industry established itself, we allocated a seat to the satellite companies and we asked that it be shared between Bell ExpressVu and Star Choice. They have never been able to work out an arrangement that would allow that seat to be filled. That seat has been vacant for three years. It is very disappointing to us and, frankly, very disappointing to at least one of the DTH providers.
As the satellite contribution to our revenues has grown, we think it is now proportionately appropriate for the DTH providers to have a second seat. We see this as an opportunity to resolve this issue of the two competitors not being able to decide how to allocate the seats among themselves. We recommend adding a second DTH seat to the board.
Trade organizations and various stakeholder groups nominate all of our board members, with the exception of the CBC. No private corporation has its own seat on the board by right. The broadcasters, for example, have a rotational arrangement that allows them to move through from time to time.
The CCTA is legally dissolving this summer. It has shut down its operation but technically, it remains in existence. We need some form of replacement nominating organization for the cable operation, the cable members and for the DTH members as well.
We need some time before our June annual meeting to figure out a solution to this problem of how to ensure that our cable and satellite members sit properly at our table. That is a defect in our bylaws.
The Chairman: I have a few questions and then I will give the floor to my colleagues.
[Translation]
One of the main arguments made by the fund's critics is the fact that it is slow to adapt to the new reality in the television industry. The fragmentation of audiences of traditional channels has now become irreversible and will even increase in the coming years.
Competition is not only coming from specialty channels. In the United States, new distribution platforms of television products are becoming more and more important and more and more people will download from the Web the shows they want to watch when they want to watch them.
Does the fund consider developing a strategy in order to adapt its policies to realities such as the downloading of shows from the Internet, video on demand which is a very interesting platform for cable companies, or even the use of television products on mobile devices such as iPods?
[English]
Mr. Barrett: That is a very good question. Of course the answer is, yes, but there are some complexities that we must deal with.
First of all, the whole area of the new platform is charged with uncertainty and insecurity because nobody knows where it is going. We have public funds, and we cannot be out ahead of where everybody is going on this. We must be cautious in our approach. Of course, we are discussing it seriously. It has been the subject of tremendous debate at our board table.
We are also mindful of the fact that there is no business model out there that would allow us to examine, or assess in an appropriate manner, how we may participate properly. The fact that there is no business model has produced an eight-week ACTRA strike and the failure of the strike to wrap up last Friday afternoon is precisely around the issue of the disagreement of the American studios over how this issue will be resolved. We are not alone in this struggle with trying to figure our way through this.
We have steadfastly approached this on the basis that we are not here to do the commercial bidding of any individual corporate entity. We have had, on many occasions before, our stakeholder groups tell us it is in their commercial interests to take a step in a particular direction. We have said no because it is our job to stand up and say no, where the interests of a particular corporate entity is driving public policy discussion.
I point out that all of the other major broadcasters in Canada are at our table now or have been in the past and they are content to work with us in terms of working through this debate. They are not saying the same things as Vidéotron and Shaw.
Finally, and most importantly, we have a finite number of resources. Canadians still go home every night and watch Canadian prime time television programs. They do it on big screens. They have yet to go away in droves and view these programs on their telephones or on internet.
Our mandate is to support the production of television programming for prime time on Canadian television networks licensed by the CRTC in Canada; that is our job. While we need to explore all ways of incorporating the new technologies, we are very mindful of cannibalizing the resources available for our main operations.
This is not a plug, but if additional resources were made available, we would welcome the opportunity to investigate and experiment in other aspects of the business. For the moment, though, every dollar we get goes on the air in the year we receive it. We spend 99 per cent of our funds in the year we receive them. We spend the money on prime time high- quality television programming for Canadians. This is not a question of burying our heads in the sand. This is a question of managing public resources in a manner that reflects the job we have been given to do under our contract with the government.
[Translation]
The Chairman: Canada is lagging behind the United States in the area of high definition programming. How does the fund contribute to producing high definition programs? Do you have a policy in this regard?
[English]
Ms. Creighton: In our contribution agreement, we have an objective of looking towards the production of HD television. The fund to date has not set a specific policy or a specific target. In 2006-07, we had a 35 per cent increase in HD production. That increase is in the absence of any particular policy. With the new contribution agreement that was just signed with government, it is definitely a target. We will be looking to discuss with the board a strategic objective for that target in this coming year.
Senator Johnson: I want to ask you a question about the 11 years you have been in existence. For the record, can you tell us about the Canadian television productions that you fund? How successful have they been compared to before you were in existence? You say you generate $3.50 for every $1 of production value. How do you evaluate how much more Canadian content is being watched?
Ms. Creighton: We have noticed that audiences for Canadian television are increasing. I will have Ms. Corcoran speak to those details. We see the difference in the number of productions and the volume of production that comes from the independent sector. The most telling point by which we can measure is in the results, the achievements, awards, and the international sales of television production.
Senator Johnson: How are those sales, and where are they?
Ms. Creighton: They are all over the world.
Senator Johnson: Which is the most popular?
Ms. Creighton: Which country?
Senator Johnson: Which programs?
Ms. Creighton: Degrassi: The Next Generation is one. There was a production done many years ago called Incredible Story Studio that sold in countries all over the world.
Ms. Corcoran: We have seen great success in the kids' categories. Nine of the top 50 shows amongst kids two to 11 years are funded by CTF. This includes shows like This is Daniel Cook, Franklin and Jane and the Dragon. Many titles are doing very well in the kids' categories. As Mr. Cardin mentioned, there is also some of the programming in the Quebec market. Internationally, Da Vinci's Inquest is in syndication in the United States and it is doing extremely well. A number of shows, such as Slings and Arrows, are being picked up by the United States networks. However, in the U.S., with the proliferation of networks, there is not enough content to go on those networks, so they are looking to Canadian programs more and more to help fill their schedules and target their niche audiences. In Canada, as we know, there is a proliferation of channels. The channels have gone from zero to 60 in an hour and the audiences are fragmenting.
We are finding that audiences to Canadian programs are doing well in comparison. Although it is not funded by the CTF, Corner Gas is doing extreme well in the Canadian market, as is Trailer Park Boys. They have name recognition across the country, as does Red Green.
In terms of a reference point before the fund and after the fund, unfortunately, due to the complexities and limitations of the measurement systems with which we work, and we do work with the systems that are available to us through BBM and Nielsen, doing a retrospective analysis on funding to Canadian programming is next to impossible. However, in 2003-04, the CTF launched a coding initiative to have all programming in Canada coded by country of origin and genre so that we could start to study how programs of Canadian origin are doing versus foreign origin, et cetera. Right now, we have fairly detailed results for the 2003-04 broadcast year and expect detailed results for 2005-06 in the coming months.
Mr. Barrett: The way that television and feature film programming have been funded in Canada for decades has been that you would apply to a government agency, and the individuals at the government agency would choose the best possible production among competing applicants. They would then provide the funding, and you would send it into the market and see how it did. We do not use that model anymore. This actually speaks to our ability to go through dramatic change. We moved away from competition among programs to competition among broadcasters for audiences. The whole idea that you would measure the success of a program that used public resources around how it did with audiences and so on is actually a new development that we introduced around 2002-03 under a former chair.
The first problem we ran into was that no one was coding or tracking how Canadian shows did and, in particular, how our shows were doing. In order to create this competitive situation, we had to build the infrastructure to achieve that goal. We really only have a couple of years in numbers under our belt, and there are still many kinks in the system.
Ms. Corcoran comes from a research background with a major Canadian broadcaster, and we are thrilled to have her. She has added huge value to what we do. When she came to work with us, she found fairly basic stuff because the whole language of competing for audiences in the public sector context was new for us.
Senator Johnson: In light of that, can you tell us about the concerns of Shaw and Vidéotron? They are not satisfied with you. The heart of the matter seems to be the fact that 37 per cent of the CTF's budget goes to the CBC/SRC. Could their issues be addressed by funding the public broadcast by different means than CTF, given that it is already funded?
Mr. Barrett: The 37 per cent number and obligation to support the CBC is part of our contribution agreement. It is not a decision. We have never discussed it at the board, ever. The advisability of funding the CBC is not something that we see as our job. The support of the CBC has been part of the exercise since the fund was initially created by Ms. Copps in 1996. That was baked in at the beginning. The government could choose to create a separate structure to support the CBC and move that money out from the CTF, but the commercial broadcasters would be left with the same number of resources and be left with a competitor not playing by the same ground rules. It is a complex question. If the government were to simply say that the CBC is ineligible to receive resources, there would be a massive financial crisis at the CBC. The cable operators are saying that they do not think the CBC should be eligible for the resources; they are not commenting on where CBC's resources should come from. They said the pool available for private broadcasters should be bigger by 37 per cent. That debate needs to occur at a governmental level.
Senator Johnson: The 37 per cent is the figure and it has never changed?
Ms. Creighton: That is the figure now. The 37 per cent is the CBC's envelope. That money does not go directly to the CBC. That is money that goes to independent producers who have a licence from the CBC.
One of the subtleties in the conversation is that the CBC is the broadcaster that has the most available shelf space in prime time for Canadian slows. Independent producers often are not too fussy about where they get a broadcast licence as long as they can get it, get their show made and get it on the air.
Historically, the CBC has fluctuated in terms of the amount of money drawn from the fund for resources to independent producers who eventually air on CBC. It has been as high as 50 per cent in the history of the fund.
We do not have any intelligence as to how the 37 per cent amount was calculated. As Mr. Barrett said, it came to us as a directive in the contribution agreement. It is not money that goes to the CBC; it is for independent production.
Senator Johnson: It goes to independent producers?
Ms. Creighton: Independent producers get a licence from the CBC, which is money that helps them finance their show, and then it is aired on CBC. Quite often, other broadcasters would have second window and the program could be aired elsewhere.
Senator Johnson: Does the CTF decide the ratio funding? You have already explained the funding for CBC. Who makes the decision on the funding for Aboriginal, French and English projects?
Ms. Creighton: We do set out, at the beginning of the year, an overall program budget that defines how much money goes into each program. Other than that, we do not set a ratio in terms of the structure of financing. That is pretty well determined by the market.
Mr. Barrett: The support of the Aboriginal language programming is part of the contract. The allocation of funds as between French and English programming is part of the contract. The allocation of resources to the Francophonie in Quebec is part of the contract.
Ms. Creighton: If you look at "dependencies'' in the appendix, you will see that there is an overall flow presentation of exactly where each percentage of the fund's money goes in terms of all the programming.
Senator Johnson: To confirm, you say you lost $51 million in 2006-07, is that correct.
Mr. Cardin: That loss is for 2007-08.
Senator Johnson: Is that what you need?
Ms. Creighton: That is projected.
Senator Johnson: How much more money do you need?
Mr. Barrett: We are talking about the loss if the cable funds were not paid.
Ms. Creighton: That is just Shaw.
Mr. Barrett: Assuming at some point the government would want to enforce its regulations, if Shaw did not pay for whatever reason, we would need some form of bridge financing until the regulations were enforced.
Senator Munson: To follow up on that, we recognize that the Canadian Television Fund money goes to independent producers. What would happen to Canadian programming at the CBC if Vidéotron and Shaw decided not to pay?
Ms. Creighton: Right now, the pool of money that comes to the CTF is combined. We do not make a distinction in terms of the programming outcome between the cable revenue and the government revenue; it is all in one pot of money. Our guidelines, rules and regulations apply across the board.
If Shaw and Vidéotron, which are the two cable companies in question at the moment, determine that they were no longer willing to contribute to the fund and that that occurred in the next year, we know that there would be an impact of $70 million to the overall system. If you wanted to draw an analogy to the CBC picture about 37 per cent of that would be reduced programming that independent producers would make that would be able to be broadcast for Canadians.
Senator Munson: Would independent producers go broke?
Ms. Creighton: Some would, yes.
Senator Munson: Shaw and Vidéotron have chosen to make this a very public battle. You have said, Mr. Barrett, that you understand Shaw and Vidéotron have concerns. I think it is bigger than just "concerns,'' they have chosen to make this a very big fight. It is as if the private broadcasters are trying to send the message that they do not want to play by these rules any more, yet the CRTC brought down the hammer. What kind of power did the CRTC have to change the minds of Vidéotron? You said something today about something happening with Shaw. What could the CRTC do to Vidéotron and Shaw if they did not play by the rules?
Mr. Barrett: The obligation under the broadcasting distribution undertaking regulations to pay, which appears annually, is firm and clear. The commission's legal authority to enforce those regulations is firm and clear. That would land us with their money, should the commission enforce its regulations some time in the mid-fall. That is way too late for us to maintain our operations.
What is going on is that the rather softer regulatory message embodied in the circular, which requires monthly payments, is the issue that is in debate at the moment. The commission is saying that if you would like to have a discussion about the role of the fund, fine. We at the fund have lived through 10 or 12 years of such discussions and are happy to welcome it. However, it is important that while we have that discussion you fulfil your legal obligations. It appears now both companies have said they would do that.
Senator Munson: What would happen to your group if broadcasters like Vidéotron and Shaw chose not to pay their money into this fund, which, from my perspective, seems to help out everybody in terms of Canadian content and the Canadian picture on Canadian television?
Mr. Barrett: If we did not to receive funds from them at all, it would be a big hit to all of the stakeholder groups that receive support and to our operations. It is important to note that the minister has made a firm commitment to a two- year renewal. That pretty much ensures that the fund will exist. The question is whether we will exist with the former level of resources that we had or with a diminished level of resources.
The number of dollars that we receive from the Canadian government is exactly the same number we received in 1996. We have had some modest increases as the BDU revenues have increased, but the government support has remained steady. On a dollar-adjusted basis our resources are no higher than they were 10 years ago. Any diminution is a challenge for us.
Senator Tkachuk: You spend about $250 million a year, is that correct? Of that, $100 million comes from the government and $150 million comes from the cable providers?
Mr. Cardin: Yes, that is correct.
Senator Tkachuk: Could you tell me, out of the $150 million, who pays what?
Ms. Creighton: We could, we do not release that information publicly on a per broadcast distribution amount.
Senator Tkachuk: Why not?
Ms. Creighton: We do not publish those figures because of the competitive nature of that business.
Senator Tkachuk: Do they pay per household or is there some kind of formula?
Mr. Cardin: It is 5 per cent of their gross revenues. Therefore, by telling you how much each contributes we are telling you their gross revenues.
Senator Tkachuk: The government kicks in $100 million and then the cable providers add another $150 million. You say you invest the money, but do you get return on the money or is this just a grant? You do not make an investment; you really just spend the money.
Mr. Barrett: We do two things. The new CTF — and we have been through many changes in the past — is an amalgam of the original cable production fund and the television funding of Telefilm Canada. In fact, it is the television funding of Telefilm Canada that was originally created in 1984 by that gentlemen standing over there. That has wound its way forward. The Telefilm Canada money was essentially an investment in programs. The cable fund money was what we call a licence fee top-up. The idea was, provided a broadcaster put up enough money, and he or she had to stretch to put up that money, we would add value to it. If the broadcaster paid a high licence fee, we would add value to it. Our participation, for many of the projects, is a blend of this licence fee top-up and an investment.
Senator Tkachuk: I am still confused. Do you go to Telefilm first or to the broadcaster first? Let us say I want to do a television show. Outside of the fact that maybe I would go to a bank, borrow the money, and see if I could run a pilot that the stations would buy, I could also go to your fund and get cash, a grant or whatever to fund the project. Is that the way it works?
Ms. Creighton: That is correct. A producer will strike a budget for a project, depending on what he is trying to make. He will then go to a number of financing resources to try to raise money to produce that program. Some of sources might be the broadcaster first to develop a licence; some could be international pre-sales; some could be development financing from our organization, or international financing; and tax credits would be another major component. The broadcaster would put together a budget based on all of those things. When all of their financing is in place, the broadcaster comes to us. We are generally, the last in the financing line. As long as they have confirmed sources to produce that program, the fund will then make its contribution.
The recuperation on the programs has averaged between $9 million and $14 million a year. Those are primarily projects that have paid back their original production costs and have some revenue on top. Those revenues will flow back into the fund based on whatever percentage of investment we put in in the first place.
Senator Tkachuk: Out of the $250 million, $9 million comes back?
Ms. Creighton: Yes, between $9 million and $14 million comes back.
Senator Tkachuk: What was the origin policy decision for the CTF? Why do we have one? What was the policy decision that drove it?
Mr. Barrett: The fund was created in 1994 by fiat of the CRTC following a structural hearing. The context of the structural hearing surrounded two issues. One of the issues was sun setting the cap rate increases for cable companies; the other was adding value to the system. The hearing discussed the role the cable system should play in adding value to the system. The commission formulated the initial idea of a private non-profit corporation with directors, how the directors would be chosen, and so on. In 1996, following two years of a very successful track record, Ms. Copps indicated we were doing a good job and that she would like to add $100 million and link CTF with the Telefilm program.
Senator Tkachuk: Originally, Ms. Corcoran was talking about the fragmentation in the television market. People do talk about that but they do not talk about the fact that we pay for that fragmentation. I used to get my television shows free. Advertisers paid for them. I put up my antenna, got three or four different stations and watched television. Now, I buy cable. No one gives it is me, I buy it. Every consumer pays for that cable. It is all paid to the Aboriginal channel, the CBC, or Newsworld, I will pay the cable company and they pay all these people. That is the way it works.
One would think that all of these cable companies receive cash to produce programs; otherwise, why would I be paying them? I have my own views in that I would prefer not to pay for about two thirds of them. I do not have a choice in that matter, because of bundling. Nonetheless, I must pay $100 a month and so does every subscriber pay from $40 to $100 depending on how many channels he or she buys. That money supposedly to make programming, would be filtered down to my home, so I could watch your channel. That is a lot of money.
Why would they have to top it up with another 5 per cent? These cable companies, out of their cash flow, pay for programming to be used by who knows whom? What is the point of that? Why do they not just take the money and buy programming themselves. The money would still be there, whether they gave it to the government or kept it themselves, except that they would be making the decisions, rather than you.
Mr. Barrett: There is only one cable operator in the country who has a directly related subsidiary programming service. All of the other operators buy channels and have affiliation arrangements with the CBC and others. The cable operators do not actually use their money to make programs.
Senator Tkachuk: They are buying from channels that make that make programs, right?
Mr. Barrett: They are indeed, yes.
Senator Tkachuk: They are then reselling them to me.
Mr. Barrett: That is correct.
Senator Tkachuk: Why are we charging them 5 per cent for you to handout?
Mr. Barrett: Great question. Ten years ago, there was a lot of discussion within the system, on that structural issue. The programs that tell Canadian stories, the ones where you can see yourself in the show, are expensive shows. They are in a very limited number of genres and for more than 30 years, the federal government has been looking for ways to support the production of those programs. This is because a broadcaster, given a choice, could offer a less expensive American show. If they did Canadian shows, they could opt for less expensive or sports or news, and so on. In order to inject into the system high-end drama, variety, performing arts and documentary shows, which are not possible to make based on the size of the Canadian market, they have created a series of subsidy systems. I would argue that the CTF is the most successful variant. We have focused on a methodology that has us step back; we do not look at shows and decide which ones are good or not. We say we will support what the broadcasters want to buy and what the producers want to make. We let them make their market with each other. We have a series of eligibility filters, which says that they have to pay a lot of money for that show if they really want to make it. If they want to step up to the bar, we will support the making of that show. We have a narrow range of shows that we will fund in terms of genres and we require they all go on prime time. We are only supporting the stuff that goes into the greatest percentage of Canadian homes.
The view, over 30 years of the policy thinking, is that activity simply would not occur were it not for a mechanism like this one. The cable operators were asked to support the CTF by providing a small portion of their gross revenues.
Broadcasters were always asked to put 50 per cent to 60 per cent of their schedule into Canadian programming. The question was what to ask the distribution side, given that it does not operate on a schedule. The percentage of gross revenues is the public policy equivalent of the Canadian content regulations for Canadian broadcasters.
Senator Tkachuk: Maybe they would charge me less for my cable. It is possible.
The Chairman: That is a comment; not a question.
Mr. Barrett: I will take my wife's advice and not answer that question.
Senator Zimmer: Thank you chair, and thank you for your presentation Mr. Barrett. We share the same voice this morning. The 2005 report by the Auditor General stated that your board was charged with overseeing the implementation of unclear program objectives. It is noted that the board must balance sometimes-competing objectives; regionalism, linguistic balance, culture balance, while at the same time supporting the creation of high- quality programming. Based on that, how does the board determine the priorities in making their funding decisions?
Mr. Barrett: Great question. This is the heart of what is the toughest thing for us to do.
We start with admittedly broad stroke public policy objectives or drivers. Then we go to work each year with our management. This past summer, Ms. Creighton and her team crossed the country visiting dozens of communities and held sessions to hear from everyone. The communities told us what they thought we were doing right, and wrong. We have passionate advocates in the community, who let us know pretty much all the time, whether they think we are doing a good or a bad job. We have a cycle of meetings each year where we grapple with the thorny issues for the fiscal year starting April 1. We start dealing with those issues at a big board retreat, each year in September. We are six or seven months ahead of the curve. All of our thinking is constantly fine-tuning what we do to see if we can get it closer to the contractual objectives that the department has set for us and to the stakeholder's expectations.
I am not sure I can be more specific except to say that you have articulated what is the headline of our annual challenge. This is to wrestle this thing to the ground in some way.
Senator Zimmer: One of the complaints about your organization cited by Shaw and Quebecor is that there is a lack of funding for new media such as video on demand. How do you respond to that complaint?
Mr. Barrett: Video on demand is a little strange for us, as a board, because video on demand does not generally make programming. It just airs existing programming. Most of the other television channels have budgets that acquire programs, and they go out in the market seeking new programs each year.
Focusing on video on demand is a little tough for us. We are methodically working out way through the universe of high definition, web-based applications, iPods and so on. We are dealing with challenges for which there are no business models. We are dealing with challenges relating to the fact that Canadians have yet to veer away from conventional viewing methods. At what point do we start applying the resources?
We are really hard up against the fact that we only have the $250 million and every penny of it is used. The challenge we face as a board is, to what extent are we prepared to cannibalize what we are already doing in order to invest in something new and unproven? If we are prepared to cannibalize, when is the right time to do it?
[Translation]
Senator Fox: As indicated on the first page of your document entitled Quick Facts, the Canadian Television Fund is a real success story. Over the years, it has greatly contributed to the success of Canadian television, especially in terms of Canadian programming and the use of creative resources, in Quebec as well as in the other provinces of Canada.
I would like clarification on one specific aspect, after which I want to return to your recommendations. On page 3 of your document you mention that the board is composed of different categories of members but you do not mention independent directors. How many are there and who are they?
[English]
Mr. Barrett: Our bylaws require that we have a minimum of five independent directors. This year, we have six, the minister has named four of them, and CAFTI named one. Mr. Carter is the nominee of that organization. The chairman is required to be independent and I am the chair. I am elected after all the other directors are elected. That gets us to six. Bruce Ryan is a financial CFO of an oil and gas business in Calgary. One of our requirements is that our audit and finance committee have a minimum number of people with financial sophistication, and Bruce Ryan meets that test. In the past, he had a connection with our business, but he does not have one now so he is independent. The assistant deputy minister of the department, Jean-Pierre Blais, is a director, and is treated as an independent. Laurie Ashton-Smith, legal counsel and the nominal president of the CCTA, has passed our independence test. A former CRTC commissioner, Gail Scott, is the last independent director. The Director General of Culture Montreal, Anne- Marie Jean, has been named by the minister.
[Translation]
Senator Fox: It seems to me the role of the independent directors is important for the credibility of the decisions made by your board. How are those independent directors chosen?
[English]
Mr. Barrett: It is open to any organization to nominate one of their members as an independent. Once they have said they think this person meets the independent tests, we require a form of written disclosure of all of that person's personal affairs and potential connections with the business and we follow a Bay Street-type protocol and template.
At the time of the annual election, each director is asked to leave the room and the remaining directors, both independent and non-independent, vote on whether that director has met the independence tests. There is a five- or six- page policy that identifies all of requirements of an independent director.
[Translation]
Senator Fox: Is there a consensus in the community about the appointment process of the independent directors?
Mr. Barrett: There is no issue with the selection mode.
Senator Fox: These people play a very important role in solving conflicts.
Let me follow up on your recommendations. We were all surprised when Vidéotron and Shaw Communications announced they would withdraw their contributions. We would like to ensure the problem will be solved once and for all. I understand from your first recommendation that you need monthly payments. It seems to me that the CRTC has the authority to enforce that?
Mr. Barrett: Yes.
Senator Fox: You also recommend that the minister of Heritage establish a "Funder's Council.'' This committee would be separate from your board and be made up of companies such as Rogers, Shaw, Vidéotron, Cogeco and DTH companies that contribute to your fund, if I am not mistaken?
[English]
Mr. Barrett: Yes, the minister writes the biggest cheque and our board has discussed this at some length. Minister Oda and her predecessors through many years, by both parties that have been in government, have given suggestions as to what they would like to accomplish with the money. We think it is appropriate for the minister to hold a consultation process around that issue.
[Translation]
Senator Fox: I am not opposed to what you are saying. So this would be an advisory committee. However, there is no guarantee that all members of this committee would agree on how the Fund spends its money at the present time.
Mr. Barrett: No.
Senator Fox: So it would be a forum for venting more than anything else. There is no guarantee that this forum would lead to a consensus among all the funders.
In other words, do those four recommendations you made solve the problem? Could it be that the real problems are more fundamental than those are being discussed right now? Will Mr. Shaw and Péladeau accept that a percentage of the money goes to producers having a licence agreement with CBC? Is there not a risk that this issue will resurface constantly? And in the end, is this not a matter of policy? Do you not think the Minister of Canadian Heritage will have ultimately to settle the matter after hearing representations from the advisory committee, by saying that, all considered, 37 per cent of the funding will go to CBC/Radio-Canada? Because at the heart of the problem is the fact that money is reserved for CBC/Radio-Canada.
Mr. Barrett: You are right, this is somewhat at the heart of the problem.
[English]
The payments to the fund are obligatory under the regulatory environment. When we, as a board, make our decisions, we have a consultative process; but it is our fiduciary responsibility to make the decisions that fulfill our obligations under the contribution agreement.
I believe Mr. Shaw said publicly that there should be a separate contribution agreement between Shaw Communications Inc. and the fund, or to whatever fund is established. I ask you to imagine what would happen if every BDU operator had a separate contribution agreement, and where there were conflicting obligations to fulfill. We would be negotiating with our funders all the time.
How real is a consultative process? I guess it ends up being how open the government is to listening to the concerns. If I hear Mr. Shaw properly, his primary concern is one of accountability. We are a transparent organization; we do not have a problem in providing a full degree of accountability, particularly if there is a forum in which we could report from time to time.
You have hit the nail on the head. The question is who makes the policy? You should know that this organization, which is your organization — it is a quasi-governmental organization — sees its job as making policy free from commercial influence.
[Translation]
Senator Champagne: Thank you for appearing before us this morning and thank you for bringing some good news, such as that Shaw has finally decided to backtrack and to resume its monthly payments. I believe that for people throughout Canada — although I am more aware of what is happening in the Montreal area — this comes as a great relief. All the producers, directors, writers, actors, technicians and post-production people can now hope that an agreement will be found.
We should not talk about amounts of money going to CBC, but it is true that the number of programs produced with the funding that will eventually be broadcast on CBC are indeed a problem.
The report of the auditor general raises a number of concerns about the Canadian Television Fund and points out specifically that "the programs are broad and lack precision.'' It will be necessary to sit down in order to provide greater clarity.
The same report points out that the composition of the board of directors is a potential source of conflicts of interest and that guidelines in this regard are not applied rigorously. Nominations to the board are made in part by Canadian Heritage but also, in part, by the industry. Where does the auditor general see a potential for conflicts of interest? Should we really believe that there are conflicts of interest?
[English]
Mr. Barrett: Like all auditors, the Auditor General assessed our organization at a particular point in time. One of the Auditor General's principal recommendations was that the structure of the organization had to change because it had two boards and two administrations. By the time we received her report, the previous government had already directed us to reorganize ourselves under this new model and establish a unitary structure.
In that context, we also took quite a number of steps to beef up both the number of independent directors, the rigorousness with which they were selected and their role within the organization. We instituted the double majority policy.
From our perspective, by the time the Auditor General had released her report it was slightly out of date. I do believe the Auditor General herself would acknowledge her job is to focus on a snapshot in time and her office picked the time just before the implementation of all of these changes.
We do not want to say that the comment is incorrect. The structure of our board does have potential for conflict and we are working on improving our environment to manage it and to rigorously enforce the conflict of interest guidelines.
In the facts sheet, we have given you a list of all of the Auditor General's comments and all of our responses. We have completed our implementation.
One of Mr. Shaw's comments is that we conflicted out one of his directors on a point. I think the director actually declared his own conflict. We are rigorously enforcing our conflict of interest guidelines and we have obviously upset Mr. Shaw by the fact that we are doing what we have been told to do.
[Translation]
Mr. Carter: We have around the table at the board of directors of the Canadian Television Fund all the resources required to draft clear funding guidelines that will serve the industry well. We need around the table producers, broadcasters and all those people in order to get a clear picture of what we are doing, because television production is a very complex business. Having people from the industry at our table brings us the wealth of knowledge required for the proper operation of the Canadian Television Fund.
Again, as Senator Fox mentioned, the independent directors have a very important role in terms of governance. Whenever there is a real or apparent conflict of interest, those independent directors have to weigh the facts and make judgments, which they do outside the presence at the table of those who have a potential conflict.
I can assure you that I have experienced many boards of public corporations but that this one, in terms of governance, is probably the most rigorous I have ever seen. Conflict of interests are very well managed.
Senator Champagne: Very well. I am pleased to see this because it appears from the rants of Shaw and Vidéotron that they see governance as a problem. They also have another complaint — and I must say that I do not really agree with them — which is about the funding of programs that will attract a smaller audience and will be less popular than shows such as Star Academy.
I wonder if an agency such as the Canadian Television Fund should not make an effort to set aside a small percentage of its funding for programs that do not attract a large audience, that are more of a cultural character, such as shows dealing with the arts, whether visual arts or classical music or such. This would give people who want to produce such programs an opportunity to find a broadcaster and to get some funding from your organization.
As for the fact that you sometimes support productions that will draw few viewers — and this is one of their grievances — how can we get them to understand that a fund that receives 100 million dollars from the Canadian government every year should also support programs other than shows that cater to a very wide audience?
Mr. Cardin: I would say that in the mix of programs that we support some are directed to a wide audience and others are not.
As Mr. Barrett mentioned at the beginning, we need to stress that we have a system of envelopes. Therefore it is not the Canadian Television Fund that evaluates the value of productions and that carries out an assessment of their content. It is broadcasters who trigger the access to our funding.
That being said, among the broadcasters that benefit from our funding we have ARTV, Télé-Québec and Bravo just as much as TVA and Global. Therefore, the type of programs you mention, variety and performing arts for example, get support from the Canadian Television Fund. One of the functions of the fund is clearly to support the type of programs that we call in our lingo "unrepresented shows'' whose production budgets are very high and which would simply not exist without a system of public support.
But it must also be said, and this answers in part the questions of Senator Johnson, that some of the programs in which we invest and for which we provide funding are tremendously successful, are profitable, achieve very high audience ratings and are financially successful at the international level, whether through the sale of the programs as such or, something which is more specific to the Quebec market, the sale as formats.
It is difficult to export complete shows that use our Quebec French, but we have been selling more and more program formats such as Un gars, une fille, Les citadins du rebut global, Les invincibles and others. In this regard I believe that the fund, through its funding streams, has achieved a good balance between programs catering to a wide audience and others with a more cultural content.
Senator Champagne: I raised this point because the funding of less popular programs was part of the grievances of the cable companies and I found this unfortunate.
One of the policy directions given to the fund under its contribution agreement is to support the dubbing industry. Could you tell us what form this support takes? What are the conditions to get funding for an English program to be dubbed in French or conversely?
I spent some 40 years in this industry and this aspect is close to my heart. What do we do to ensure this industry can survive and that these actors who have specialized in dubbing can continue to earn a living?
Mr. Cardin: In our last annual report, out of the roughly 250 million dollars that the fund invests annually, support for the versioning industry was not a large part of our funding.
Senator Champagne: Dubbing does not provide a living to many actors.
Mr. Cardin: No, I agree. We support in average the dubbing from one language to another of some 15 productions a year. We could have a discussion at the board level to review the amounts that we presently provide.
Senator Champagne: I wondered in what measure support for dubbing was part of your policy directions.
[English]
Senator Eyton: Were the recent actions by Shaw and Quebecor a surprise or were they generally anticipated?
Mr. Barrett: It was not a surprise that both Shaw and Vidéotron were unhappy. We have had periods in the past where fairly large interests have been unhappy, and we have done our best to absorb their views and stand by our decisions. Until now, those large interests have said, "Okay, that is the nature of the exercise, and we will step back.'' They did not have the financial lever that these two companies have to kick-start to debate. It was a surprise that they took the steps they did, but it was not a surprise they were unhappy.
Senator Eyton: Was it part of an ongoing in-house discussion until they went public?
Mr. Barrett: In the case of Shaw, we have had a vacant seat on the board for three years that has been a source of contention. I have been trying to meet with them for some time to discuss it. In the case of Vidéotron, the video on demand issue has been a source of contention. They are very different issues.
Senator Eyton: Are any of the criticisms expressed by Shaw and Quebecor legitimate? Have you responded to them, or are you planning on responding to them?
Mr. Barrett: The board thinks, and we have discussed it, that we have not built an adequate role for our BDU supporters. As supporters, quite apart from their commercial interests, we have not done as well as we could have done with the Rogers, et cetera of the world. That is why we genuinely recommend the notion of a funders' council. It is recognition that they are making a major contribution to the system. Whether that contribution is obligatory or not, we think it gives them the right to have a voice. That is something we think is on the mark.
Senator Eyton: Have you tabled that suggestion?
Mr. Barrett: We have done so with the standing committee, with you and with the minister, yes.
Ms. Creighton: In the strategic planning session we held last January, we talked about how to do a better job in our relationship with the highest percentage of our funders, which is the BDU community. There is a lot of confusion out there. You may have heard the comments that Mr. Shaw made about the success of the Shaw Rocket Fund, their own private children's fund. They are certainly true. It is a very successful fund. The fact of the matter is that the CTF supports 80 per cent of those same projects and in many cases triggers those projects to go into the marketplace.
Perhaps, we have not done a good job of reporting to that BDU community on the success of the fund and the interrelationship between those activities. We certainly have a series of objectives to do a better job of managing the overall relationship on accountability and reporting to that BDU community.
Senator Eyton: Might you be trying to invest in too many projects? From the material I have here, over 10 years, you have done something like 4,500 projects, running on average 450 or 500 per year. How can you manage that number of projects?
Mr. Barrett: I will ask Ms. Creighton to comment, but I would say that we have had incredible staff, and we have also focused on administrative efficiency. Not only do we invest in those 450 projects, but we do so at a total cost of just over 5 per cent over the funds under administration. We have had years in which the obligation from the department was that we do this for 7 per cent. Now our obligation is 6 per cent, and we are beating the obligation by a considerable margin by doing it for 5 per cent.
Some of it has to do with the way we approach things. It is a private sector approach. We try to create automatic mechanisms that platform on other people's good decisions. We use eligibility filters without trying to second guess the value judgments.
Ms. Creighton: This is a very volatile business. There are no trade secrets that will give you a list of things that make a successful Canadian production that Canadian audiences will want to watch. If we had the answer to that, there would be a lot more wealthy people in the country.
There is a great deal of work involved in production and the more that goes into development and production, the more sophisticated the production companies become and the better the relationships with the broadcasters become. The more projects they do, the better they get at financing those projects. The intent is to ensure that we have Canadian content in our broadcasting system.
That debate has been out there. Are there too many production companies in the country? Are we trying to make too much? Should we focus on 25 or 30 good projects and hope they are more successful?
Unfortunately, the nature and subjectivity of programming is volatile. What appeals to one market will not appeal to another. If we lessen the amount we do, we risk less success. It is like developing a quality grade of oil. How much research and development goes into that before you get that good quality at the gas pumps? It is a debate that happens on both sides.
There are finite resources. In the old days, with the demand to the CTF, we were only meeting about 50 per cent of what came in the door.
That motivated the move to the broadcaster envelopes. The decision-making was placed in the hands of the broadcasters that are closest to the market in the attempt to meet the market needs. That balances the cultural argument that we discussed earlier.
The belief is that this is the amount of money available and we put it into Canadian programming to get as much on to the screens of Canadian viewers as we can, across the demands of kids, youth, drama, documentary, variety and performing arts, which are the major genres that we fund.
Senator Eyton: You dealt with some of the criticisms of the Auditor General. You dealt with conflict and perhaps with complexity. However, you did not deal with the comment in the report where she described your activities as cumbersome. In this regard, I look at the nine policy directions enumerated in our material. They cover the waterfront and they are all over the place. I cannot see that there is any direction whatever. I will not read them but those policy directions should be part of the record so we know what they say. Many directions sometimes overlap. I superimpose on that a board of directors that I think counts 19 members, representing all sectors of the industry. I suddenly have policy directives that I think, at least in their impact, are vague and confusing. Then I go to 19 directors. I say, "Here, we want you to set policy.'' That is cumbersome and it seems to me that it cannot work very well.
I recognize that you have said to the contrary this morning but I have had some experience on boards. If someone suggested to me that 19 is an ideal number, I would say no.
Can you comment on the directives and the board? Might you not simplify it and have better direction? Might you not have a smaller board that could be more effective?
Mr. Barrett: I know you have had much experience on boards. I have a high regard for your expertise. I have had much less experience, but some. I would agree with you that it is not supposed to work. It does not work on paper. The crazy thing is that it works. I am not sure I understand why it works. Some of it has to do with the fact that, unlike many boards, we live by hard deadlines. We have a real deliverable. If we do not have our guidelines for the following April 1 out by December 15, we would have insurrection in the industry, because the entire industry waits to get our rules before it orders and does business with one another. We have a tendency to work extremely hard, very efficiently and intensively with each other in the September, October, November period.
How are meetings managed with 20 people at the table? That is an interesting question. In addition, we have a full independent committee meeting before every board meeting to go through the conflicts associated with all of the agenda items introduced as a result of the Auditor General's recommendation.
There is a terrifying sense of velocity that goes on at these meetings. Some of it has to do with the fact that we are building on a long past. While the directions read vaguely for someone coming at them for the first time, there is a longstanding history that goes back many years. Some items have been settled out. For instance, the 37 per cent comes up this year because it was specifically put in the contribution agreement, but, as Ms. Creighton pointed out, for the past seven, eight or nine years the CBC has been getting somewhere between 38 per cent and 48 per cent of the pie in a different, more ambiguous environment.
I cannot tell you why it works. You say, would it work better if we had fewer people?
Senator Eyton: Would it work if you had fewer directions?
Mr. Barrett: It might work better if we had fewer directions, but I would be hard-pressed to pick the one that would fall by the wayside.
Senator Eyton: Would you like my help?
Mr. Barrett: Sure. The other dynamic is that almost every board with which I have been involved has activists and observers. I do not have any observers. There is not a single person who does not have something to say. We work in an environment where each person has tremendous regard for one another's expertise and experience. They accept the direction of the chair. There is not much speechifying.
If we were to cut the board down, a tremendous amount of the debate would be moved out into the industry and the board members would have a much more rigorous role. The question is, what debate should we have at our table and what should happen out in the stakeholders' groups? That is a tough question.
Ms. Creighton: It is a very complex organization, with a complex mandate. As you so rightly pointed out, much of the direction in the contribution agreement is very broad, a bit nebulous and quite vague, but it is interesting to observe how it unfolds. I will use support to our regions as an example.
For many years, there has been a perception that there is a lack of support to the regions across the country and that production financing is centralized. The CTF is interesting in that it is like living in a fishbowl. It is not a very private organization because many of the things we do are debated amongst the industry across the country. Believe me, if something shifts just slightly, we have a whole task force and working group on us to take a look at it.
When all the debate was happening in the country on the regional versus larger centre support, when it came down to an analysis of the facts, we have a working group mechanism where we bring board members and often others from the industry into the debate and actually look at the statistics. People see that balance in regional support versus the centres has been about 45 to 52 over the history and years of the fund. Yes, it can fluctuate dramatically from one year to the next. This year we know for sure, there is very little production in Newfoundland, partly because of some broadcasting patterns. It fluctuates based on what is happening in each region.
It is complex and there are many people around the table, but Mr. Barrett made the point that at the end of the day there is a deadline and decisions must be made. We are driven by that deadline. Not always is everyone happy, but at the end of the day people generally try to speak to the larger interests of the industry and what benefits most often everyone involved, not just a particular policy question that comes to the table, whether it be Aboriginal funding, regional funding or French outside Quebec. It is true that everyone wants more money. Right now we are being pressured aggressively by both the documentary community and the children's and youth communities because they feel they need a higher percentage from the fund than they are getting, and much of our resources currently go to drama. We try to look at what is going on out there, what are the general audiences, where is the market driving the support, and respond accordingly. We try to balance all those competing interests, as well as the lack of direction.
Mr. Barrett: We understand that the Schulich people have an interest in looking at us as a unique way of doing business.
Looking at it from a strict governance perspective, from the academic side, we have complete independence from management, no control group and hard deadlines. It is interesting what those three things force. No one can win ultimately so people do push their point and then step back, and the stepping back is interesting. There is a willingness to scrabble together an acceptable solution. We will break out and come back; we will make a decision by eleven o'clock. The forcing of the agenda has a remarkable impact. The no-control group is a big and unappreciated feature.
Senator Eyton: I will be waiting for the Schulich study.
[Translation]
Senator Dawson: Our chairman regularly says that things are working well. However, we are having this committee meeting because two or your main players came close to contempt for the government by refusing to pay their share. You can go on saying that things are working well but we should at least acknowledge that there is a certain amount of controversy.
You mentioned earlier that you are going to set up a "Funder's Council.'' This will certainly provide an opportunity for these people to vent in a forum other than the national media and to take actions other than withholding their financial contribution.
Like Senator Eyton I have difficulty understanding how you can say that things are working well when so much criticism is directed towards you. Nevertheless, I am an unconditional supporter of the Fund. I was there in the 80s when the decision was made to create indirect funding by participants. We give licences to people to make money and it seems quite reasonable to me to ask them to contribute towards programming.
But we will need to find a way to deal with grievances. I see concerns from the auditor general regarding conflicts of interest, from those who wonder why the private sector subsidizes the public sector. As far as I am concerned, I fully support CBC but I can very well imagine, if I were Pierre Karl Péladeau and saw my money being used to support my competitors in an open market, that I might have some reservations. I realize that the subsidy to the CBC is an indirect one but let us be honest, it is still a subsidy. The CBC is drawing 38 to 40 per cent of the money and I can understand that some would have grievances.
We talked about View on demand, iPod, Internet. The market is evolving very rapidly and you are an organization that tends to seek a consensus. How will we be able to deal with the grievances of Péladeau and Shaw regarding the productions, the after-life? You mentioned earlier, Mr. Cardin, the sale of formats. This is a new concept. When the fund was created or even just the notion of supporting production, it was inconceivable that we would subsidize directly people to produce formats that they would sell internationally and this in itself justifies the demands from the private sector people.
I understand your recommendation for a Funder's Council, it will give them an opportunity to vent, but how are we going to deal with Mr. Shaw or Mr. Péladeau in the coming weeks in order to tell them that we got their message, that there is an issue and that we will find a solution.
[English]
Mr. Barrett: I have three things to say. First, I look upon the last month as an extraordinary period of time for the fund, not because two cable operators have said they have major problems, but because about seven other major cable operators have made their monthly payments on time and without hassle and have noticeably not come out in support of these gentlemen.
I also think it is extraordinary that there has been articulate and unconditional support for the television producers' associations in English and French, from the Canadian Association of Broadcasters, from the Documentary Organisation of Canada, from ACTRA and from the Writers Guild. These organizations, in many cases, are at each other's throat; and they have all, without any attempt to organize them on our part, come out in support of this mechanism. Sometimes it is important to hear through the noisiness at the front to the statements of support at the back.
Second, everyone says there is a new market evolving. Around our table today we have CTV and CHUM, and we have had Alliance Atlantis in the past — these people are at the forefront of the very best thinking. Our best assessment is that we have evolving technology but there has yet to be an evolving market.
When there is an evolving market and Canadians want, in some tonnage, to consume in a different way, my bet is that with our partner, the Department of Canadian Heritage, we will be there. Right now, the strike is evidence that that there is yet to be an evolving market. It is important to keep a steady hand and not jump too soon.
Ms. Creighton: To add to that, it is true that Quebecor has publicly stated its concern about private financing supporting public activity. However, it also might be of interest to you that Vidéotron contributes — and this has been made public — some $15 million to the fund, but actually, draw's just over $18 million out of the fund for activity that is then broadcast on their channel. It is a pretty equitable balance in that way.
Senator Tkachuk: Do you pay your board members?
Mr. Barrett: Independent board members are paid.
Senator Tkachuk: What do they get paid?
Mr. Barrett: They get paid a retainer of $2,400 a year, plus $1,000 per day in meeting fees. The chairman gets paid, in addition to that, a monthly retainer. It is not a full-time job for anyone. Directors, other than the six independents and the chair, are not paid.
Senator Tkachuk: Do you have an operating budget? What is the percentage of your operating budget?
Ms. Creighton: We administer the fund at 5 per cent of the budget.
Senator Tkachuk: That is how much? Is it 5 per cent of $250 million?
Ms. Creighton: Yes.
Senator Munson: In your "Quick Facts, A Canadian Success Story,'' there are a lot of impressive figures. How many jobs do you think the Canadian Television Fund has created over the past 10 years? How important is it to the Canadian cultural television community in an economic sense?
Ms. Creighton: The last statistics we have on that are roughly 44,000 jobs. Of that, the CTF provides 22,000.
The Chairman: Thank you for your participation today. I had a phone call last Friday about our agenda on this matter. Someone asked me why were covering this issue because House of Commons is doing it. From what I heard this morning, I think there were many questions asked and many answers given to us that will help us in preparing our June report. We are not through yet; we will have other meetings on the same matter.
Mr. Barrett: We are very happy to have had the opportunity to appear here.
[Translation]
The Chairman: Senators also are very interested by this subject.
[English]
The committee adjourned.