Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 4 - Evidence, April 9, 2014
OTTAWA, Wednesday, April 9, 2014
The Standing Senate Committee on Transport and Communications met this day at 6:46 p.m. to examine the challenges faced by the Canadian Broadcasting Corporation in relation to the changing environment of broadcasting and communications.
Senator Dennis Dawson (Chair) in the chair.
[English]
The Chair: Honourable senators, today we are continuing our study into the challenges faced by the Canadian Broadcasting Corporation in relation to the changing environment of broadcasting and communications.
Our witnesses for today are from the Association of Canadian Advertisers. We have Robert Reaume, Vice President Policy and Research; Anne Myers, President of Starcom Mediavest Group and a Board Member of the Canadian Media Directors' Council; and Janet Callaghan, Executive Director of Canadian Media Directors' Council.
Mr. Reaume, you have the floor.
Robert Reaume, Vice President Policy and Research, Association of Canadian Advertisers: Thank you, Mr. Chair. Good evening. We are very pleased to have this opportunity to participate with our comments in your committee's review of the Canadian Broadcasting Corporation. Our group here today represents two different organizations. Ms. Myers and Ms. Callaghan are from the Canadian Media Directors' Council.
My organization, founded in 1914, the Association of Canadian Advertisers, is the only professional trade association solely dedicated to representing the interests of client companies that market and advertise their products and services in Canada. Our members, over 200 companies and divisions, represent a wide range of industry sectors, including manufacturing, retailing, packaged goods, financial services and communications. They are the top advertisers in Canada, with collective annual sales of close to $300 billion.
Anne Myers, President, Starcom Mediavest Group; Board Member, Canadian Media Directors' Council, Association of Canadian Advertisers: The Canadian Media Directors' Council is an independent organization of media professionals representing advertising agencies and media management companies who work to advance the effectiveness of media advertising in Canada. Our members account for approximately 80 per cent of the total media ad spend transacted annually in Canada.
Together, we are Canada's advertising industry — the professionals who plan, create, produce, purchase and, yes, pay for advertising of the vast majority of products and services in our country. We are appearing jointly before you today because broadcasting is essential to all our members' businesses and, as such, our interests are allied and crucially linked.
Mr. Reaume: Senators, allow us to provide a little bit of background first.
Advertising is a significant economic force in the world. In virtually all developed countries, advertising is considered an important and necessary component of the communications infrastructure. It is estimated that worldwide disposable advertising expenditure neared $2 trillion U.S. last year.
In Canada, advertising is the primary resource sustaining the broadcasting system. Net advertising media spend in Canada was estimated to represent $15 billion in revenue flow to media companies in 2012, the latest year for which data is currently available. Of this total amount, approximately $3.5 billion is invested annually in television advertising and about $1.6 billion in radio advertising.
Considering these substantial revenues, the role of advertising is critical to a healthy and robust broadcasting system in Canada. It is advertising, really, that pays for the programs that inform, entertain and educate Canadians. In return, advertisers have a vehicle to communicate with their customers. This relationship between broadcasting and advertising has yielded many mutual benefits since the advent of broadcasting. As such, as a general philosophical position, we believe in universal access and choice, and that all television and radio services should permit and, indeed, benefit from commercial advertising.
This symbiotic relationship extends to the CBC/Radio-Canada. Advertisers have always supported the CBC, and we are proud of the role we have had in its success. Advertising has contributed to the financing of years of Canadian programming on CBC/Radio-Canada, which continues today with support for such shows as ``Dragon's Den,'' ``Murdoch Mysteries,'' ``Rick Mercer Report,'' ``Tout le monde en parle'' and ``Les Parents,'' to name a just a few.
Janet Callaghan, Executive Director, Canadian Media Directors' Council, Association of Canadian Advertisers: Sports also play an essential role to CBC and Canadians, a relationship that goes beyond hockey, although that's hard to imagine at this time of year. In terms of other sports programming, the CBC/Radio-Canada proved their expertise and prowess in the recent coverage of the Sochi winter games in all its varied distribution channels and in line with current consumer consumption patterns. Many of our clients participated as active sponsors in the games, and the CBC demonstrated their ability to deliver the standards of multi-platform sponsorship programs demanded in today's market place. This support in the form of advertising for the public broadcaster allows governments to be fiscally prudent while still advancing public policy goals, and we believe that advertising is an essential ingredient and guarantee to CBC's future vitality.
CBC Television and Radio-Canada currently supply substantial amounts of commercial inventory, as well as sponsorship opportunities, to the advertising marketplace. Some have suggested that CBC TV should reduce its reliance on commercial revenues, currently at some $330 million per year for conventional and digital properties. In our opinion, this would only serve to reduce necessary and healthy competition and should not be contemplated. Without CBC's contribution of commercial inventory, the competitive balance that it provides in the marketplace would be lost. The cost of TV advertising generally would be driven up, forcing advertisers to naturally divert some portion of their spending to other media. This will only serve to diminish overall advertising funding for television and eventually weaken the broadcasting system.
The relative influence of Radio-Canada on the French advertising ecosystem is even more pronounced than in English Canada. French services account for 40 per cent of stated CBC advertising revenue. The prime time audience share of SRC in French Canada is triple that of the CBC in English Canada, and the specialty channel share is quadruple. Thus, SRC's commercial inventory plays a very significant role in making Quebec broadcast audiences accessible to Canadian advertisers and in ensuring competitive pricing practices are governing that marketplace.
Mr. Reaume: Again, we believe in the importance of advertising in supporting broadcasting and for creating Canadian content. As such, we believe that a universal access commercialization policy should extend as well to CBC Radio. Many unique, desirable and commercially viable audiences are generated by CBC Radio, audiences that could be easily monetized to help contribute to the achievement of the public broadcaster's goals.
The importance of CBC to the advertiser goes beyond television time. In the broader area of sponsorship, CBC is quite unique among Canadian broadcasters in that it can offer advertisers substantial content integration opportunities in the many truly Canadian content programs that it airs. Advertisers are increasingly looking for this sponsorship type of communication, sometimes known as branded entertainment or, more currently, native advertising, as viewers have acquired so many more methods to avoid traditional 30-second spots. CBC's ``Kraft Hockeyville'' is an excellent example of this, as is ``Dragon's Den.'' With its complete schedule of Canadian programs and its ability to operate most often unencumbered by American program supply restrictions, CBC TV is exceedingly well positioned to take advantage of these growing opportunities.
Ms. Myers: In the realm of digital media, CBC and Radio-Canada also offer Canadian advertisers quality properties to convey our digital strategies. As I am sure you have heard from many of your previous presentations, the marketing environment in Canada has changed dramatically in the last 10 years. It has been transformed both here and around the world with the significant growth of digital media. In 2012, $3.1 billion was invested in digital advertising in Canada, larger than any other medium now except television, and it is quickly gaining on television, only 14 per cent behind. In fact, how we in the marketing and advertising industry define ``broadcasting'' itself has changed and must now include digital distribution channels.
CBC provides first-class digital assets, with CBC.CA ranking higher in unique visitors than other individual broadcaster sites and offering Canadian advertisers access to a coveted audience. As Internet protocol television, or IPTV, and addressable television are introduced to the marketplace in the coming years, the targeted audiences that are available on both broadcast and digital platforms will be even more valuable assets.
Both the ACA and the CMDC support a vibrant commercial marketplace. This marketplace includes an active role by the CBC in all formats. It has been suggested that CBC TV could go commercial-free and a benefit would be a return to the high journalistic standards that have built the network's reputation. We would unequivocally state that we do not believe that an advertising environment and high journalistic standards are mutually exclusive concepts.
There is no doubt that the recent loss of ``Hockey Night in Canada'' as a programming staple on the CBC is going to be a challenge to replace from both an audience and a revenue perspective long term, but it will allow the CBC to reimagine its strategic vision and programming strategy. Considering any approach that exacerbates that loss of advertising funding will only compound the change process. Indeed, the importance of strong, stable, long-term funding to complement this would give advertisers confidence that CBC and Radio-Canada will continue to be worth the investment.
Mr. Reaume: In closing, there exists the opportunity for CBC to establish a new distinctive, experimental Canadian content strategy that drives engagement and conversation, that is distributed and amplified across existing and new emerging channels, and offers expanded opportunities for brand integrations and branded content.
Senators, we wish you well in your deliberations and we thank you for the opportunity to contribute. We would be pleased to try to answer any questions you might have.
The Chair: Thank you very much for this very interesting presentation.
Senator Housakos: Thank you, and welcome to our committee.
Can you elaborate a little more for us in regard to the changing technologies in the last few years? Technology seems to be changing almost daily when it comes to media. I have never seen anything so fluid. Can you tell us if the CBC, in your opinion, has been up to date with those challenges? I know they have invested over the last few years tens of millions of dollars in their digital plan. They're waiting to see when that bears fruit.
A lot of witnesses have come to us and said the fact that they're not vertically integrated like some of their competitors — like Bell, Global and Videotron — makes it difficult for the CBC and Radio-Canada in the context of the ever-changing technological environment to be able to be as responsive to their advertising clientele. Can we have your views on that?
Mr. Reaume: That is several questions in one, but I will do my best.
Obviously, as far as technological changes go, what we're talking about mostly is the Internet and what that can enhance or contribute to broadcasting. I will ask my colleagues as well for their comments on this.
In my opinion, CBC has done one of the best jobs in keeping up to date with their digital assets. CBC.CA took to the Internet quite quickly and made a commitment to it, as far as we can tell. Their expertise at it was really on show during the Olympics, where anyone with a smartphone could have access to their coverage of the Olympics.
I will ask my colleagues if they want to add anything.
Ms. Callaghan: Yes, I want to make one thing clear. You asked whether they are at a disadvantage by not having other assets. That could be seen as a disadvantage if they're not one of the big BDUs in terms of being able to subsidize different areas.
If you look at some of the BDUs, media is 6 or 8 per cent of the revenue. Sometimes we see the media is treated as less important because it is not contributing to the corporate profit as much as it can if it is a stand-alone like any other independent broadcaster. In one way it's important, and in one way it's unimportant.
Ms. Myers: The world is changing on a daily basis. Certainly digital advertising in all its forms is an important component. Five years ago, digital advertising, from our perspective, consisted mostly of banner advertising on websites; today it takes many different forms from mobile and on-line video, which is a growing part of the business.
Senator Housakos: From your clients' perspective, what would be the most significant difference between the public and private broadcasters in terms of dealing with them?
Mr. Reaume: They both have sales forces that come to media agencies and clients. From that point of view, I don't see a difference. They both have sponsorship or TV time to sell, and they're both very professional sales forces.
Ms. Callaghan: The difference would be in the product, and things are different now. Advertisers aren't only looking for the big box car numbers; they are looking for less waste. They're looking for targeted and engaging programming, which the CBC can provide.
Senator Housakos: If I understood correctly, in your presentation you said the total advertising revenue in Canada is $300 billion. Is that the number?
Mr. Reaume: Fifteen billion dollars in total ad spend that goes to media companies, but $3.5 billion to broadcasting.
Ms. Callaghan: Three hundred billion was the collective amount of your advertiser revenue.
Senator Housakos: Is that the collective amount of radio, TV and all advertising?
Ms. Callaghan: No, that was the amount of your members.
Ms. Myers: That was the sales —
Senator Housakos: That was your total sales. So it's $3.5 billion of media TV time. Now, from that $3.5 billion, what percentage would go to CBC/Radio-Canada compared to the private sector?
Ms. Myers: Well, according to CBC's reported numbers, they generate about $330 million in advertising, so it's a relatively small component of that.
Senator Housakos: Less than 10 per cent. So the rest of that would be going primarily to the big competitor.
Mr. Reaume: Yes.
Senator Housakos: A lot of us are newbies in this, so is it possible to elaborate on how media buying and placement is done? How do your clients determine what slots they buy? Is it based on ratings or prices? For example, does CBC sell its prime-time or 30-second slots at X amount of dollars compared to their competitors? What would determine the varying price differences for the same slot during prime time versus the afternoon?
Ms. Myers: We would agree on our strategy with our clients. We would put a request for proposal out to all the broadcasters if we are doing a television buy. They would come back to us with proposals that would include a variety of programming within different parts of the day and their cost proposal.
It is very much a negotiation game. On our side of the business, we understand the range we're willing to pay on a cost-per-thousand basis, and we would evaluate the audiences that the programming mix would be delivered to and that each network is offering. We would then engage in a negotiation process to arrive at the best mix of programming and cost that we feel offers the most advantage.
Senator Housakos: I assume ratings play a role in that. Right now I am impressed with the numbers for radio. Radio is one of the oldest forms of communication. People said years ago that it would become an obsolete form of communication; yet they are still gaining top dollar.
Ms. Callaghan: Radio is delivering the local market. As broadcasters and specialty channels have been covering Canada, radio has been able to capitalize on being local. We differ from the United States. We do not have network radio or a lot of network national radio; so it does deliver the local market and that's important.
Ms. Myers: It's fair to say, unfortunately, with the move to digital advertising, that it's the print medium that has suffered the most in terms of the transfer of dollars.
Senator Demers: Thank you very much for being here. How has the advertising market changed with the growing popularity of services such as Netflix and Apple TV?
Mr. Reaume: Netflix and Apple TV have taken time away from television and, although it's seen through the same device, it's consuming viewing time that customers and consumers used to give to television. I've seen a figure that 30 per cent of broadband use during prime time is to Netflix. That's an extraordinary figure, but it's true.
From our point of view, these non-commercial services are taking viewers away from TV programs that advertisers would have access to. We're not particularly fond of this trend.
We think services like Netflix, as we said in our presentation, should be allowed to accept advertising as well.
Ms. Callaghan: I think the interesting part about what Netflix has demonstrated is that people are binge viewing. They don't want to wait for each episode to happen. When competition comes in, the marketplace adapts its product to suit what consumers want. There is every opportunity to adapt the scheduling, and that's an opportunity for anyone to run six episodes of a series at once.
Not only that, Netflix is providing money to broadcasters for programming that has already run; it's often two and three years old. It is providing some benefits in terms of money to the broadcaster.
Senator Plett: You suggest that Netflix should be allowed to have advertising. I think I'm an average viewer, and that would defeat the purpose of having Netflix.
The other night my wife and I were going to watch an older movie that was on. I started watching it, and then I thought, ``Well, why am I watching it on regular television where I have to go through all the commercials?'' I went and got my iPad to see if I could find it on Netflix. That particular show I couldn't find.
Nevertheless, I went to see if I could find it on Netflix so that I could watch it without the commercials. If we would allow advertising on Netflix, I would think they wouldn't want to have the advertising because I think it would defeat the purpose that most Canadians have for watching it.
Ms. Callaghan: I think that advertising may change to sponsorship and that kind of thing, that you might see advertising at the beginning. Do you want Netflix to stay at $7 a month?
Senator Plett: I'm fine with that.
Ms. Callaghan: Exactly, but is it going to?
Senator Plett: You're right, and if it was in the beginning, possibly. But one of the reasons, more than the fact that it's $7.99 per month — again, I believe I'm an average Canadian viewer. More of my reason for using Netflix is that I can watch shows without commercials and also watch the episodes all at once. With a few of the episodes that I've watched, such as ``House of Cards,'' I wait until they're all out and then sit over a period of three or four nights and watch the whole series.
Mr. Reaume: There's no doubt that consumers enjoy the non-commercial product, but advertising is necessary in many cases to supplement the cost of the content. Netflix is not currently offering advertising. You may recall that we used to be able to go to the video store, get a video, and you actually watched the movie directly. Now there are ads prior to the movie coming on.
Senator Plett: Ads that you can fast-forward.
Mr. Reaume: Yes.
Senator Demers: This might be too early to ask you because it just happened this year, but I know you people plan in advance, for sure. What plans do your clients have in place when CBC/Radio-Canada will no longer carry NHL hockey? Hopefully I'm not getting too far ahead.
Ms. Myers: It's sort of from two perspectives. Obviously, with Rogers now having the hockey contract, many of our clients are in negotiations with Rogers in terms of if hockey is an important component of their marketing plans. They would be talking to Rogers then, no doubt.
I think we're all waiting to see from the CBC's perspective what will happen. There have been some announcements this week about programs being renewed, and come the beginning of June, when our marketplace sort of experiences what we call the Canadian upfronts and all the networks announce their schedules for the coming broadcast year, that is when we will have a better idea of what the strategy will be.
Senator Mercer: Thank you very much for being here. I appreciate your presentation. I've already learned some new things, such as the new phrase of ``binge viewing.'' It fits, as Senator Plett mentioned, ``House of Cards.'' ``Downton Abbey'' is another one that people binge view. There are other shows on the American side that come out in bunches as well that people binge view.
Interestingly enough, we're here to study the effects on CBC, but it may be a separate study to talk about the changes in how Canadians watch television or watch entertainment. The effect is on an important industry in our country, and that is the advertising industry and all the components of it, such as production and sales, et cetera.
You have a big challenge. We have the Internet, PVRs, digital media, Netflix, Apple TV, et cetera, many of which are geared to do one thing: avoid watching your product. You don't buy a PVR because you want to watch the next car commercial; you want to avoid the next car commercial. This is a challenge that, while it directly affects your industry, does flow over into the media. Why am I going to buy advertising on any one of the networks when the audience is going to fast-forward through my ad? I think that's a real challenge for you. I don't know how you will respond to that.
This is slightly off topic, but is there a need for the industry to analyze how you respond to this change? These changes are happening so fast. Netflix is not that old, but it's causing a rather large disruption in the ability of your industry to make a living.
Mr. Reaume: I would offer the comment that we're quite concerned with PVRs or DVRs, as they are sometimes called, because they allow consumers to tape the content and skip through the commercials. This is why we think CBC is uniquely positioned to look into the future and to create an atmosphere where consumers will not want to skip through, and that is by creating what we referred to in our presentation as ``branded entertainment'' — a program like ``Kraft Hockeyville,'' where the advertiser has underwritten the programming itself, that is something that consumers do want to watch, and the corporate message comes through the program.
Many of the other broadcasters are not in as good a position as CBC because CBC creates enormous amounts of Canadian content. As we said in our presentation, they are unencumbered by American program producer restrictions. They've created programs, such as ````American Idol,'' where the sponsors are already in the program in the United States. There isn't much that a Canadian advertiser can do except buy 30-second spots in the program.
So CBC is really well-positioned to use advertiser sponsorship dollars to underwrite their programming for the future. I think my colleagues might want to add to these comments as well.
Ms. Myers: Certainly, Canadian broadcasters are trying to react to this changing circumstance. While PVR viewing is a concern, it isn't necessarily today as high as you might think it is. With the introduction of things like video-on- demand, where the broadcasters are able to insert or place commercial messages that you can't fast-forward through, they are trying to address some of that.
Ms. Callaghan: I think with a lot of change there's a lot of opportunity. There have been a lot of start-ups and a lot of different kinds of advertising, such as experiential. Branded entertainment is one, but it is a rich and vibrant marketplace for advertising now. One of the things is somebody has to pay for the content. There has been the accusation of Netflix with their series that they only have the rights for a certain number of years, I think only the one run.
Not everybody has worked out their business models yet. It isn't gloom and doom. I don't think anyone knows quite how it will evolve, but there is a lot of opportunity in the marketplace, so we aren't lacking choice.
Senator Mercer: Ms. Myers, you brought up the issue of video-on-demand services and, of course, people lobbied to the CRTC to allow Canadian advertising on video-on-demand services. To what extent does access to this platform affect your clients? Is it changing how you're doing business? Is it helping?
Ms. Myers: It will. As of today, there are, quite honestly, a number of tests that are about to go into place over the next few months with our clients and Canadian broadcasters in terms of trying to understand how video-on-demand is impacting consumer viewing habits and what impact it's having. To date, there has not been advertising included in video-on-demand other than station promos.
Senator Mercer: Ms. Callaghan, you mentioned if CBC/Radio-Canada were to get out of the advertising business, it would add revenue to other media. What other media is there? There are the other television stations.
Ms. Callaghan: No, it could be online. It could be a different kind of campaign, a different strategy. We live in a world of supply and demand in terms of broadcast advertising and advertising in general, so, if we lose the CBC in terms of its inventory, there could be pressure on less inventory. The price would go up. Some clients will not pay more.
Senator Mercer: We live in an age of click-and-skip. We press the button and we skip the advertising. I'm not attacking it; I'm trying to understand how we resolve it.
Senator Housakos asked how you buy ads. The real answer is: Who do you want to talk to? You made a comment about the CBC having a niche market. In certain cases, those are the people you may want to talk to, depending on what you're selling. It's like political parties. When we buy advertising, we determine what segment of the population we want to talk to, and we buy that kind of advertising.
I think there's a niche marketing thing. Just because CBC doesn't have a huge part of the market, it has some very important niche markets that advertisers are interested in.
Ms. Callaghan: Yes.
Senator Mercer: And it's not just hockey.
Ms. Callaghan: No. It's being depicted that hockey was the heart of CBC, but then CBC has the intellectual capital with its news and public affairs, and the belly in terms of the Rick Mercer comedy shows. They've got quite a range of product and a good range of product.
Senator Mercer: There has been the suggestion several times here that CBC may want to replace the time that they currently allocate to hockey to airing Canadian-made movies and/or television programs. Can you sell ads for that type of programming?
Mr. Reaume: Sure.
Ms. Callaghan: I think so.
Senator Mercer: At a rate that will be supportive of the CBC and provide them with the necessary revenue?
Ms. Myers: It's a combination of what kind of audiences they can generate for that and how those audiences, from a competitive standpoint, will be priced. As I said, we buy things more on a cost-per-thousand basis so, if it's competitively priced to the other networks for a wanted audience, then yes.
Senator Plett: I want to continue along the line of buying advertising. Ms. Callaghan, you suggested that there's only so much money that people are going to spend to buy advertising.
Ms. Callaghan: In terms of a comparison year-on-year.
Senator Plett: Fair enough. We're talking Netflix, we're talking PVR, all the new technology and the fact that young people are, in many cases, not even watching television. They're watching it all on the computer or their iPads.
Have the people who are buying the ads started making changes vis-à-vis possibly dressing up their ads and making them a little sexier, if you will?
Again, I like to use illustrations of my own home. My wife and I love watching curling, so, of course, we watched all of the women's curling and the men's curling. Scotties, of course, advertises on the women's curling. I was so happy when the curling was over, and I didn't have to watch that silly Scotties commercial anymore. Then, the other day, on a regular show, there they were out there with the same old commercial that seems to be three years old. What is the business community doing?
If I watch the Super Bowl, I actually don't want to fast-forward through the commercials because they have some pretty nice commercials on the Super Bowl for which they're paying millions of dollars for a 30-second ad. I'm actually looking forward to seeing some of these commercials. Is the business community doing something to dress up that advertising a little more and make me want to maybe not fast forward through the commercial?
Ms. Callaghan: Endless tracking. It's obviously working with some people, and it may be turning others off. Perhaps you don't buy Scotties and, therefore, you are not in the target group.
Senator Plett: I do, but not because of the commercial.
Mr. Reaume: For the record, I like the Scotties commercial; it's one of our members.
Senator Plett: Fair enough, and you should like it as one of your members. But they will need to find a time to realize that, after me watching these guys put the Scotties back on the shelf, eventually they need to move on to another one.
Mr. Reaume: You've hit upon the $64 million question. All we do is to try to make these commercials grab viewers' attention and keep it. It's not an easy thing to do. Everybody thinks it's quite easy. It's not an easy thing to do.
Senator Plett: I guess, for what it's worth, I know the commercial inside and out, so I have spent some time watching it.
The Chair: You've given them more coverage. This is not broadcast to millions of people, but, on a Saturday night, at 2 o'clock in the morning, somebody will be channel-hopping and hear your ad for Scotties.
Senator Eggleton: I hope this hasn't been asked already, because I just got here. I don't think so.
We've had people come before us who have suggested that CBC should really get out of the advertising business altogether. Some have really expressed concern about Radio 2, which is doing an experimental phase on advertising, but some are also saying, ``Get out of it on television as well.'' I don't expect that that's your message.
One of the things that the CBC is in is a revenue squeeze. It can't get enough money from the government to produce the kind of quality programming that more people are going to watch, and it doesn't get good ratings because of that. Can advertising play a bigger role? Is that possible, or will that depend upon it improving the quality of the production or going more off of Canadian kind of content?
Mr. Reaume: You won't be surprised to learn that we don't think that CBC should get out of the commercial business. As a matter of fact, we think they can do more of it, and we also think that it's fiscally prudent for the CBC to make at least a portion of their revenue from commercial sources. It allows them to be financially responsible and, shall we say, keeps the annual allotment from Parliament at a reasonable level. If it wasn't there, it would have to be found somewhere else.
As we've said in our presentation, we think that the CBC is quite uniquely positioned to be able to source, in particular, sponsorship funds for programming so that it can underwrite programming with sponsor messages in the programming, not necessarily just in the commercials. We've also said, in our presentation, that we think that CBC Radio has very monetizable properties. It doesn't have to be a full load of intrusive 30- and 60-second commercials on radio. It can be done in a more genteel sort of corporate sponsorship way. CBC Radio has some fantastic programs that advertisers would love to step up to.
Senator Eggleton: Is that on both Radio One and Radio 2?
Mr. Reaume: Yes.
Senator Eggleton: Okay. I hear you. I expected you to say that.
In terms of commercial advertising, CBC television is going in the opposite direction, at the moment, because of the loss of the revenues relevant to NHL hockey. It has to make up for that and even go beyond that if it's going to help close the gap in terms of its revenue needs and what it gets in its parliamentary allotment. Isn't that also a sore point with the private television industry, CBC getting too commercial, too much of the revenue that perhaps takes away from them? Is there enough to increase the size of the pot, or are we just talking about dividing the pie up more?
Mr. Reaume: I don't see any reason why CBC should get out of the commercial business. They're offering very good entertainment and news product. They educate Canadians. Somebody has to pay for that content. It shouldn't be solely on the taxpayer. This is why advertising exists. It's a contract with Canadians from the early days of newspapers. We bring you editorial content, but there are ads around the editorial content or entertainment. It's somewhat of a social contract, so I would answer: Why not CBC? I don't get the argument that the privates should have all the advertising revenue.
Senator Eggleton: What would you suggest to CBC that it could do now to change direction? They are going down, at the moment, because of the hockey loss. We've got to get them to go back up and beyond that. What would you suggest to them as the means to do that?
Ms. Callaghan: I think in the past they have adapted. There is something called ``Program X,'' that goes way back to about 1970 or 1973, when the CBC ran half-hour dramas for about $9,000 per drama. Charles Oberdorf was the executive producer, and they ran it for three years because they were going through a tough time, and there was a lot of ingenuity. So there are all kinds of ingenious programming that could be done.
One of the senators mentioned Saturday night's movies, old Canadian movies. If you have a genre, something could be made of that, and it could be made bigger. However, I think in trying to program a network for Canadians when every five years we add 1.2 million Canadians through immigration, there is a lot of vitality in the marketplace for different kinds of programs and different kinds of business models. I think it's up to the creative community.
Senator Eggleton: They need to be more creative in terms of the programming. Better quality programming will attract more advertising.
Ms. Callaghan: I don't think Canadian content has the stigma it used to have many years ago. It's talked about with a lot more pride.
Senator Eggleton: I agree, but at the same time, the advertisers are going to want to see the numbers in the ratings that justify those kinds of expenditures.
Ms. Callaghan: Advertisers are interested in less wastage, not necessarily the big numbers.
Ms. Myers: Exactly what I was going to say. To our clients, these days, it's about targeting and identifying exactly who you are trying to reach and reaching as many of them, but with as little wastage as possible.
Senator Housakos: Can you give us an idea where the revenues were for TV advertising five years ago compared to today's $3.5 billion? Are they on an increase or decrease?
Mr. Reaume: I think, I'm not mistaken, if I tell you for the last five years, there has always been an increase. It has been a smaller increase each year, but it is still on the upswing, and Janet has the numbers handy.
Ms. Callaghan: Five years ago, so we'd say 2007-2008, $3.4 billion. It went down through the recession, 3.1; 3.4; 3.6; and 3.5.
Senator Housakos: It's back up as the economy starts to gear up.
Senator Eggleton: Do you have it further back than that?
Ms. Callaghan: I have it to 2003.
The Chair: Maybe you could supply it to the clerk.
Senator Eggleton: I would like to see that if you can supply it.
Ms. Callaghan: We'll leave our book behind.
Senator Housakos: My next question is in regard to the CBC and the revenue. From what I understand, the revenue has consistently been going down in terms of advertising dollars over the last while, notwithstanding the recent loss of ``Hockey Night in Canada.'' Now it will just compound the problem.
In your opinion as advertisers, why are 90 per cent of the dollars not going to the CBC right now? What are the primary reasons they're not able to get a bigger market of that $3.5 billion?
Ms. Callaghan: There is a splintering. Look at the amount of channels. Look what we have now. There was a time when we'd all say, aghast, ``A 200 channel universe?'' Look what we have now.
Senator Housakos: One of their competitors, which would be Bell, how many advertising dollars do they get out of the $3.5 billion? Is it $300 million?
Mr. Reaume: But they have 45 channels.
Senator Housakos: You're saying they have a wider pool of channels to choose from.
Ms. Callaghan: Yes.
Ms. Myers: Both conventional and specialty.
Ms. Callaghan: The growth has been in specialty.
Senator Housakos: From your expertise, what are the three, four, five top shows or type of broadcasting that brings in top advertising dollars? I always assumed it would be sports or prime time motion pictures, and news would be trailing. Am I accurate in my assessment?
Ms. Myers: It will vary by season, but in terms of overall genres, certainly, sports is up there, but if you look at the top-rated programs on a weekly basis, for good or bad, most of them probably are American imports.
Senator Housakos: So prime time motion pictures from the U.S. would be No. 1?
Ms. Myers: Not motion pictures, but scripted programming, and reality programming has obviously become much more extensive.
Senator Housakos: So reality programming, prime time American shows and sports would be the top three. Would news be trailing in fourth place?
Ms. Callaghan: Not this week.
Senator Housakos: It varies.
Mr. Reaume: It varies. We shouldn't discount, either, those blockbuster events like the Academy Awards, Super Bowl, Grey Cup, Olympics and that sort of thing.
The Chair: I would like to thank the witnesses for their presentation and inform the committee members that when we come back after the break, we will get into our study of the practice of collecting and analyzing from Bell Canada customers for commercial purposes, including targeted advertising.
The witnesses will be, on April 29, the Privacy Commissioner, and on April 30, Bell Canada will be appearing, so we're walking away for a while from the CBC study.
In May we will be getting the legislation on Bill C-31, the budget implementation bill, so during the six sessions of the month of May, we will be studying budget implementation and we will decide at that time what we will be doing for June and July.
Senator Mercer: This is a result of the budget bill?
The Chair: This study is the one that was proposed by Senator Housakos in another reference from the Senate, and with the budget implementation bill, we're going to get three parts of the budget: one, Champlain Bridge; two, security and transport; and three, roaming charges.
Ms. Myers, Mr. Reaume, and Ms. Callaghan, thank you very much for the presentation.
(The committee adjourned.)