Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 12 - Evidence, December 10, 2014


OTTAWA, Wednesday, December 10, 2014

The Standing Senate Committee on Transport and Communications met this day, at 6:45 p.m., to continue its study on 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.

[Translation]

The Chair: I call to order this meeting of the Standing Senate Committee on Transport and Communications. Today, we are continuing our study on the challenges faced by the Canadian Broadcasting Corporation in relation to the changing environment of broadcasting and communications.

Our witness is Rémi Racine, Chair of the CBC/Radio-Canada Board of Directors. Before I invite Mr. Racine to take the floor, I have a few loose ends to tie up.

[English]

Senator Unger, last week you asked about an agreement between Quebec and Ontario. I told you we couldn't get into details about the immigration side, but I did get and I would like to table a resolution that was adopted by the National Assembly of Québec in both official languages as an exhibit. I'd like the clerk to have someone distribute them. If you agree, I will read it in English.

RESOLUTION OF THE NATIONAL ASSEMBLY OF QUÉBEC

THAT the National Assembly recognize the vital role Société Radio-Canada plays in providing news coverage, cultural content and entertainment to Québec francophones and 2.6 million francophones and francophiles outside Québec;

THAT the National Assembly affirm that the current cutbacks in Société Radio-Canada's French-language services are of deep concern in Québec and across Canada;

THAT the National Assembly reiterate the desirability of having a strong francophone public broadcaster and the importance of regional news;

THAT the National Assembly urge the federal government to support Société Radio-Canada in carrying out its mandate and give it the means needed to meet its obligations under federal legislation.

What I don't understand, even though it was adopted, is that there was no process by which we were informed about it. The President of the National Assembly was in Ottawa this week, and that's how I heard about the resolution.

It does not address your particular question of immigration, but it does address the fact that the Quebec government has a strong position on the issue. I wanted to inform the committee, and I will give the resolutions to the clerk.

As far as the immigration question is concerned, I asked him, not as chair but as a colleague, to try to get back to you on the question of francophone immigration outside of Quebec.

Senator Unger: Thank you, chair.

[Translation]

The Chair: I invite Mr. Racine to take the floor. Afterwards, the senators will have an opportunity to ask their questions.

[English]

Rémi Racine, Chairman of the Board, Canadian Broadcasting Corporation: Mr. Chair, senators, on behalf of the Board of Directors of CBC/Radio-Canada, I welcome the opportunity to meet with you today on your study of the challenges faced by CBC/Radio-Canada in the context of a changing broadcasting and communications landscape.

The members of the corporation's board of directors are appointed by order-in-council, as set out in the Broadcasting Act. Our work is supported by five board committees on English- and French-language broadcasting, on human resources and governance, infrastructure, strategy planning and audit.

The board meets regularly, about eight times a year. The minutes of its meetings are posted on our corporate website.

It is the board's responsibility to oversee the business of the corporation. The board approves CBC/Radio-Canada's corporate plan and annual report, its financial statements, as well as a strategic and business plans. The board does not participate in the programming decisions or day-to-day operations of the broadcaster.

[Translation]

Earlier this year, the board approved the corporation's new five-year strategic plan titled A Space for Us All. This plan is the corporation's response to the challenges in the changing broadcasting landscape that this committee has been asked to study. It calls for nothing short of a transformation. I think it is important to point out that the strategic committee of the board followed every step in the development of this plan with regular meetings with the corporation's senior management.

The board supports this plan because, frankly, Canadians' habits are changing. They are now consuming programming all day, on every device they own. CBC/Radio-Canada needs to make changes in how it creates and delivers programming in order to remain relevant and present in the lives of Canadians. This means shifting more focus to digital content, while not ignoring traditional radio and television services. It means providing new kinds of services in a more efficient manner.

In many ways, technology has helped us become more efficient. Automation and technology mean fewer people are necessary to produce radio and television programs. By 2020, there will be 1,500 fewer employees at the corporation. There will be less in-house production and more programs by Canadian independent producers. The corporation will have a smaller real estate footprint as it focuses its efforts and resources on the content people use, rather than on infrastructure. The corporation is also modernizing the way it provides local services by tailoring its service — television, radio and online — based on where the audience in each community is going for their information, and finding ways to engage with them all day long. These changes have already begun. The corporation will be announcing further details of its local news strategy tomorrow.

What the corporation is doing will make CBC/Radio-Canada more flexible and adaptable. But the challenge the industry is facing is bigger. It is the conventional broadcasting model in Canada that needs fixing.

As the CRTC heard during its recent Let's Talk TV hearings, conventional television revenues are shrinking. The current broadcasting system can no longer sustain the creation and distribution of the Canadian content Canadians expect. This is not simply a CBC/Radio-Canada problem, but a Canada-wide problem. The fragmentation of Canadian audiences has never been so great.

Conventional English television's share of total advertising in Canada has dropped by 25 per cent since 1990. Private broadcasters are tied to a model that forces them to simulcast American programming on Canadian channels during primetime, when most people are watching television.

The public broadcaster has a public mandate that consists of the following aspects: to contribute to the cultural fabric of Canada through the creation of programs that reflect and promote Canadian talent; to reflect and serve the needs of all Canadians in both official languages; and to inform, enlighten and entertain.

However, it is more and more difficult to do that when, every year, the corporation is able to do less. We continue to gain efficiencies, but at some point, it becomes more and more difficult to find savings. That means trimming elsewhere — fewer Canadian programs, fewer episodes, more repeats.

The corporation has proposed some solutions, which this committee should consider. First, conventional broadcasters should get paid by cable and satellite providers for the content they are currently taking for free and reselling to Canadians. Some have tried to claim that, in the case of CBC/Radio-Canada, this would be double-dipping because of the corporation's parliamentary appropriations. I do not think that's true. The appropriations have never covered the cost of all of our services. Think of VIA Rail, for instance, which receives parliamentary appropriations, yet no one expects to ride the train for free.

Currently, only specialty networks are paid for their content, and conventional broadcasters are not. With the shift in advertising to digital, that imbalance is not sustainable.

Second, Canadian programs won't exist without funding. Audiences are simply not large enough in Canada to cover the cost of making quality programs. The Canada Media Fund has been crucial to the continued existence of high-priority Canadian drama. The same is true for news.

As you have heard, local news remains a huge priority for Canadians, but the loss of the Local Programming Improvement Fund has meant fewer resources for the local news Canadians want. The creation of a local news fund for all conventional broadcasters could address that.

Government-wide spending restrictions, together with a broken advertising model, pose a particular challenge for CBC/Radio-Canada. The corporation continues to do what is necessary to balance its budget, as it must, but it will produce fewer Canadian programs. It is time for a frank discussion with Canadians about public funding levels for public broadcasting.

Canada has the highest need for public broadcasting given its size, complexity and proximity to the United States. Yes, the corporation does receive $1 billion a year in parliamentary appropriations. CBC/Radio-Canada, with its funding, and with the commercial revenue it generates, provides services to Canadians that no one else could provide. For example, it provides essential services to Canada's north and to remote regions; commercial-free national radio services; a television schedule that is overwhelmingly Canadian, especially in prime time, and that includes nation-building programming. Despite that, Canadians are saying that they want more from public broadcasting.

To be clear, I believe the corporation has developed a strong plan to ensure it can navigate in a changing global media landscape. If Canadians want more, then investing in public broadcasting needs to be a priority.

Thank you for your attention. I would be pleased to take your questions.

The Chair: Thank you, Mr. Racine. I want to take this opportunity to congratulate you on the coverage Radio-Canada provided of the great Jean Béliveau's funeral service today. The tribute was very well done and dignified. People can be a bit critical here, so we try to give compliments whenever we get a chance.

[English]

Senator Housakos: Thank you, chair, for your benevolence, as usual.

Welcome to our committee. My first question has to do with ratings. On a number of occasions, I've referred to the ratings of the CBC, and others on this committee have referred to the ratings of CBC/Radio-Canada, and a lot of people have different perspectives on ratings. I would like to know what your perspective on ratings is. Do you believe it is an important parameter in evaluating the organization? Is it a benchmark that the board of directors sets? Do you also feel that ratings have an impact on the advertising revenue that comes into the company? How would you justify them to your shareholders? You run a private business, and you know what a PNL is. You evaluate your quarters and you evaluate your annual bottom line. As a board member, how do you go back to the shareholders, who are the taxpayers, and what benchmarks do you use to evaluate success or failure?

Mr. Racine: When we evaluate programs and success at CBC/Radio-Canada, we do evaluate ratings as part of our mandate. It's not the only factor in decision making. It is one of them, and obviously it influences revenue. It's part of the decision. The content needs to be very good. It needs to showcase Canada. There are many different things that we look at, but obviously ratings is one of them.

If you look at what we've done in the past few years, when a show is not looked at or listened to, we change the show. Sometimes we keep a show that doesn't have good ratings because it's part of our mandate to showcase some content to Canadians, but certainly ratings are part of our equation and we look at them all the time.

[Translation]

Senator Housakos: I agree with you; ratings are very important. When we look at the ratings of the corporation's French network, we realize that they are not bad at all. I find them to be very respectable. By comparison, I think the English network's ratings are horrible.

Does the board of directors have an explanation for this? Is the board worried by the fact that the French network has better ratings than its anglophone counterpart? What can be done to increase the English network's ratings?

Mr. Racine: More changes have been made to the English teams over the past few years than to the French teams. A lot more changes have been made in English than in French. That said, you should keep in mind that the CBC is competing with U.S. networks for audiences.

As I said in my opening remarks, Canadian anglophones can watch both U.S. and Canadian television, and that greatly increases the competition. We cannot compare the two networks. I think we are improving a lot in English, and our French network is doing very well. We are making very good programming in English, but the English market is a bit different from the French one.

Senator Housakos: The ratings of the CBC/Radio-Canada English network have been dropping for a while, and we recently lost a flagship program — "Hockey Night in Canada." Given these developments, do you think we are less Canadian today than we were 30 years ago?

Mr. Racine: No, we are as Canadian as we were 30 years ago. As for the program "Hockey Night in Canada," we cannot use Canadians' money to compete with private companies over the rights to broadcast National Hockey League matches. I think the board of directors did everything it could to keep our broadcasting rights, but we could not go beyond our mandate, as we did not have the necessary means or the impression that Canadians should finance that endeavour.

As for the rest of your question, I think that our efforts in English are very solid. In perspective, we have to remember that our English radio programming is ranked first in a number of markets. On television, we are producing a lot of nation-binding programming, despite a smaller audience in terms of percentages. However, as I said, the competition is totally different in English than in French.

Senator Housakos: I have one last question on transparency. I know perfectly well that CBC/Radio-Canada has been working hard for years on improving its transparency, providing a lot of information on websites, and so on. However, we cannot say that CBC/Radio-Canada's transparency can be compared to the likes of the BBC, which witnesses in this committee have often brought up as the closest example and model for CBC/Radio-Canada. The BBC's website provides pretty much any information you might be looking for, on any topic, such as the president's salary —

[English]

Line item by line item, if you go to the BBC website, you will know where every single pound is going in terms of their expenses and their revenues.

[Translation]

Why can't the same thing be done for CBC/Radio-Canada?

[English]

Mr. Racine: Culturally, we are changing this. Slowly but surely, we have changed. Since I've been on the board, we've changed our transparency a lot. We have done many things. On access to information, we were one of the worst, if not the worst, and now we're one of the best, if not the best. So we've changed.

In terms of getting access to salaries, I think that we've done, in the last few months, better than we were doing, and there are still things to be improved. We are still improving.

Senator Plett: Welcome, Mr. Racine. I want to continue a little bit along the line of my colleague, Senator Housakos, about ratings, not entirely but somewhat.

You say that, when a program does not do well, you take the program off of the air. That makes sense, but, when CBC doesn't do well, when 2 per cent of the people watch CBC in Alberta or 5 per cent across the country, what do we do?

I want to read part of your statement here and then I want you to explain it a little more for me, if you would:

Government-wide restraint, together with a broken advertising model, poses a particular challenge for CBC/ Radio-Canada. It continues to do what is necessary to balance its budget, as it must, but it will produce fewer Canadian programs. It is time for a frank discussion with Canadians about public funding levels for public broadcasting. And Canada has the highest need for public broadcasting given its size, complexity and proximity to the United States.

I'll ask a couple of questions on that or for an explanation, if you don't mind, and, certainly, it is time for a frank discussion with Canadians, which I think is part of what we're doing here right now.

I'm not sure where we go and whether we do a poll or what we do. I think viewership has to be part of our answer. As to our "need for public broadcaster given the size of our country, the complexity and proximity to the United States," the chair just said, at the start, the great job you had done today in broadcasting the funeral of hockey icon Jean Béliveau.

Most of us watched the Olympics and I think it was the best job that any broadcaster that I've watched has ever done on the Olympics. But, at the last Olympics in Vancouver, we didn't have iPads. Now, there's new technology, so given the new technology that we have, why is it still that important for a public broadcaster? I understand why it used to be important. I understand that Nunavut, Yellowknife and Whitehorse all needed access to everything that we have in the South, but they have that now with satellites, iPads and the Internet. Why is it still important for a public broadcaster "given the size, complexity and proximity to the United States?"

Mr. Racine: For Canadian content. The most important thing that we have to keep is our cultural differences between us and the U.S, and the public broadcaster is the primary vehicle for Canada to showcase Canadian talent. If there is no business model, that's where we come in. We have to provide Canadians with Canadian content and showcase Canadian talent.

Senator Plett: But you say that, when a program isn't being watched, you drop it.

Mr. Racine: We find other content made by Canadians to showcase Canada. I am in the entertainment business. When I do a project that does not work, I stop it and start another one. It doesn't mean that, because we fail on one program, we're failing as a broadcaster. It just means that that program didn't appeal. That's it. It's part of the process.

Even in French, where you say that we're successful, we cancel shows every year, all the time.

Senator Plett: You are successful in French, but I would question that success.

Mr. Racine: We are successful in English. Like I said, you have to put this in perspective. We are successful in English because, within the environment in English, the ratings we have are not great but are substantial.

Senator Plett: Five per cent is substantial?

Mr. Racine: Yes, because there are hundreds of channels in English and hundreds of choices.

Senator Plett: It's not my position to debate, so I'll leave it there.

I want to talk a little bit about conditions of employment at CBC. The president and CEO of the Canadian Broadcasting Corporation, Mr. Lacroix, lives in Montreal, which is not where the headquarters of CBC is located. I'm going to ask all three of these questions in a row here and, if you don't remember, then I'll repeat them later.

In the reasonable course of his duties, how often would the president and CEO be required to travel to Toronto and Ottawa? If the arrangement does, in fact, require considerable commuting, given the place of Mr. Lacroix's residence, has this been considered and approved by the board? Are there other CBC/Radio-Canada employees who have substantial regular commutes to work and for whom the CBC pays commuting expenses?

Mr. Racine: What is the question?

Senator Plett: I think I asked three questions. How often would the president travel back and forth?

Mr. Racine: So, historically, his predecessor was also based in Montreal. Historically, the executive members, obviously, the one who oversees English and one who oversees French, are in Montreal and Toronto, but the others are either in Ottawa, Toronto or Montreal. Some of our functions are based in Ottawa. The finance person would probably need to be in Ottawa very often, if not all the time. The other functions, the president for instance, comes to Ottawa often, goes to a Toronto regularly and works in Montreal. In today's world, with all of the technology we have —

Senator Plett: I agree. With the technology we have, is it necessary for him to travel around? Couldn't he do all of his work from one spot with the technology that we have?

Mr. Racine: He comes to Ottawa and to Toronto when needed. He goes to Toronto probably once a month and he comes to Ottawa more than that, but not every week. Most of the time, he's in Montreal.

For him, he obviously travels around the country a lot, because part of his duties is to visit all our studios and work environments regularly. He travels a lot across Canada, and so did his predecessor.

Senator Plett: Are there any other CBC employees who would travel maybe to Vancouver or Washington to do their work, living somewhere else?

Mr. Racine: Not that I know of.

Senator Plett: Would you be able to check that for us and let us know?

Mr. Racine: Yes, I will.

Senator Eggleton: Ratings, of course, got top billing on the first few questions. But I agree with you; ratings aren't everything. In fact, I think your ratings are probably better than some of my colleagues think they are, certainly on some of your programming. I want to tackle a couple of things.

I want to talk for a moment about the board structure, how well that serves the public broadcasting in this country. Some witnesses have suggested it's not an arm's-length relationship because both you and the president are appointed by the Governor-in-Council — the Prime Minister, in effect — as are the board members.

Another witness came before us and said:

The president is not really responsible to the board of directors in any serious way. The board of directors is more like an advisory board.

I want to get some better understanding of the structure of the board compared to, let's say, a private-sector company that's publicly traded. They're subject to quite a number of rules. How would you see the similarities or differences? Do you think a better structure for the board of the CBC is merited, and how would you see a difference from what it is?

Mr. Racine: I'll comment on some of your thoughts. First of all, to say that we're advisory, you should ask the CEO if we're advisory or not.

Senator Eggleton: That was a witness, not me.

Mr. Racine: Because when he comes in with plans and stuff like that, sometimes he's turned down by the board. It's a normal relationship between the CEO and a board of a public company or private. You have to convince the board.

Are we like a publicly traded company? We're different. We're a Crown corporation that is independent from the government. We're in a place that is different than the others, but in some ways we're very similar when we approve budgets and plans. We approve almost everything like a usual company.

Senator Eggleton: The other part of my question was, how do you demonstrate that you're arm's-length from the government when you're appointed by the government? How do you counter the impression that you're not independent, that you're just doing the government's bidding?

Mr. Racine: First of all, when we come in as a board member, we get training about what is the law exactly and what are our duties as a board member. Surprisingly to outside perception, the board members, as soon as they come into that room, they act totally independently from any stakeholders. We take our duties seriously and we give our guidance and we approve what we feel is good for the CBC.

Senator Eggleton: Who would you say your shareholders are?

Mr. Racine: Canadians.

Senator Eggleton: Let me ask you about a statement you made. You stated:

First, conventional broadcasters should get paid by cable and satellite providers for the content providers are currently taking for free and reselling . . .

You say, though, that some claim that this would be double-dipping, but you say it is not. Could you just explain? How would this work? Would this give you additional revenue? How exactly would this system work?

Mr. Racine: Well, it's what are the traditional broadcasters. When we went to the CRTC, we asked to get money from the cable and satellite companies for our feed. We provide a lot of content to Canadians through cable and satellite, and we don't get paid. We feel that if we got some money from Canadians this way, then we would provide more Canadian content to Canadians.

Senator Eggleton: How much revenue do you think that might produce, or you would like to see?

Mr. Racine: I don't have any numbers. Any number would be invested in content. I think it's as important on local news as it is on general content.

Senator Eggleton: You finished up by saying:

If Canadians want more, then investing in public broadcasting needs to be a priority.

Currently, the CBC is among the lowest in the world in terms of public broadcasters, at $33 per capita, whereas the BBC was mentioned earlier and it's at $97 per capita. In fact, the average for public broadcasters is $82 per capita. So you're way down there at $33. Are you being starved to death?

Mr. Racine: No, but obviously if a carriage fee and local fund would come in, that number would be much higher. That's the government funding.

Senator Eggleton: The U.K. gets theirs on a licence fee. So you're saying —

Mr. Racine: We have a hybrid system, where we get some advertising and the government funding. What I'm saying is that if Canadians want to have more Canadian content from their public broadcaster, then I think the way to get more money is through the fee.

Senator Eggleton: You need other revenues; the fee, as one example.

Mr. Racine: Yes.

Senator Batters: Thank you, Mr. Racine. I like how you said tonight that Canadians are your shareholders, very forthrightly. With that in mind, many Canadians were very distressed recently about the situation that unfolded very recently with Jian Ghomeshi. I would like you to tell us tonight about the formal status of the cessation of Jian Ghomeshi's employment with the CBC. Was this a termination? With or without cause? Was he simply asked to resign? Did he resign? Et cetera.

Further to that, I also want you to tell us on the record here tonight whether any form of severance payment, retirement package — any form of remuneration whatsoever — was paid to Jian Ghomeshi by CBC when he left CBC. I'm talking about a very inclusive basis here, everything including statutory minimums, et cetera.

Mr. Racine: First of all, it's a management matter. What happened is that an employee was dismissed. The board was advised of that just hours before, because he was obviously a celebrity. We don't get advice on any employee situation. It was different for him. But the board was advised, and it's a management issue.

The Chair: Senator Batters, just so that we agree. I said the same thing to Senator Plett at previous hearings: If you're talking about process, if you're talking about the future of CBC, if you're talking about transparency, that's all under the responsibility of the hearings we're having on the future of CBC. If you're bringing up a particular case, I'll have to bring you back to order, because this is not the object of the study. We are not mandated to do that.

Senator Batters: Well, I think there's been some leniency in a few other hearings before.

The Chair: I let you ask the question and I let him answer the question, but I think, depending on where you're going in your line of questioning, there might be a time when I'll say, "I'm sorry; this is not pertinent to the study."

Senator Batters: All right. If you'll give me a little bit more leeway here.

You said that it's a management decision, and that's fine. Maybe you are aware of this and maybe you aren't aware of it, but I want to know specifically about what the formal status was that you were advised. Was it a termination? Was it an asked to resign? Was it a resignation, and what about any form of remuneration?

Mr. Racine: He was terminated.

Senator Batters: With cause or without cause?

Mr. Racine: I don't know the legality.

Senator Batters: Could you find out?

Mr. Racine: Yes, I could.

Senator Batters: What about any remuneration paid to him on leaving CBC?

Mr. Racine: I don't know exactly. I don't think so, but I don't know.

Senator Batters: Could you find that out for us, too?

Mr. Racine: Yes, I will.

Senator Unger: Thank you, Mr. Racine. It's a very interesting presentation. From your presentation you say the current broadcasting system can no longer sustain the creation and distribution of the Canadian content that Canadians expect. This is not a CBC/Radio-Canada problem, but a Canada problem. What does that mean?

Mr. Racine: It means that in 10 years the landscape is going to be a lot different, and if we still want to have high-quality Canadian content for viewers, if we want to do as much as today, at some point we'll have to have more revenue in some fashion. That's all I said.

Senator Unger: To that point, I asked a previous witness who was speaking about Canadian content whether Canadians really care if the TV they choose to watch is made in Canada or the U.S — you referenced English, especially — and her answer was no, Canadian content doesn't matter that much. I guess if you like certain programs you'll watch them regardless of where they are made. Do you think Canadians really care about Canadian content?

Mr. Racine: I do. Myself, I watch a lot of U.S. and foreign content, but I enjoy watching Canadian content more and differently than when I watch U.S. and foreign content. Our research shows that Canadians want to see Canadian content. Canadian content includes not only the big TV shows, but it includes local news, national and regional news. It includes a lot.

Senator Unger: What demographic are you talking about? Do you think younger people sit still long enough to pay attention to that?

Mr. Racine: They watch and listen to our content totally differently from the older audience, but they do. Obviously, they don't watch it on TV at eight o'clock at night. They also have interest in their local news and what happens locally and regionally. They're consumers, like the others, but they do consume differently.

Obviously, that is why we're transforming the corporation, because we think that everybody is going to change. As the media and the hardware change, people will consume our content differently going forward.

Senator Unger: You talk about the money that you get from the federal government not being enough, and I'm wondering if historically the CBC was able to live off of the stipend that they were given by the federal government. Was there ever a time when there was enough money to manage everything?

Mr. Racine: Well, if you listen to everybody, 20 years ago it was great. I would say that it could be great 10 years from now, but it's going to be different. Our plan is that it will be great in 10 years, but it will be different.

Canadians will consume CBC/Radio-Canada totally differently in 5 or 10 years than they used to 20 years ago. Twenty years ago, there were a few channels in Canada. Thirty years ago, if you listen to some, it was great because there were four channels. At that time we had 25 per cent; we were one of four.

Senator Unger: So, competition has caught up.

Mr. Racine: Yes, of course.

Senator Greene: I'd like to ask a series of questions on the CBC library, which I imagine is full of Canadian content going back 60 years and more. What's the condition of that library?

Mr. Racine: What I know is that the programs that we feel we could reuse have been transformed into digital content, and some are just kept there. I don't think it would be a good investment to transform everything so that people can have access to everything, but, when management feels that the content should be brought back to life, they do so.

Senator Greene: How do Canadians access that library? It would be good. You mentioned that CBC management has chosen some programs to keep longer than others. It kind of worries me a little bit. It would be a good thing if Canadians could somehow be part of that and watch that, because they are programs that they paid for, in some sense.

Mr. Racine: I agree that if cost didn't matter, then we would probably have everything available online all the time.

Senator Greene: That's the essence of Canadian content, because a lot of those old stories are valid today and people would be interested in them.

Mr. Racine: Yes, but there's a cost to everything.

Senator Greene: Sure.

Mr. Racine: I think we're choosing the ones we feel will be viewed by Canadians, vis-à-vis the cost that it costs to transform them and to make them available to Canadians. We have research that provides us information about what Canadians are looking for, and we're looking at this all the time. Obviously, there's always a cost to this.

For example, if one person in Canada has asked for one TV series in the last five years and it costs thousands of dollars to transform, we're probably not going to do it.

Senator Greene: That's really the essence of Canadian content over the past number of years. It seems to me that it should be part of the CBC's mandate, if you would, to keep a history of the programs that Canadians have watched so future generations could have access to them.

Mr. Racine: There is a lot that is available.

Senator Greene: There is a lot.

Mr. Racine: And we have other channels. In French, for instance, ARTV broadcasts a lot of our old content. In English, there's a lot available online. Is that enough? I don't know, but there is a lot.

Senator Greene: What's the value of the library? Is there an asset value? It is an asset.

Mr. Racine: Yes, but we don't put a book value to it. We're obviously not traded, so we don't evaluate this.

Senator Greene: But it has a value.

Mr. Racine: Of course.

Senator Greene: Have you thought of making the library available to other broadcasters?

Mr. Racine: Internationally, we did, and we are all the time.

Nationally, I don't think we did.

Senator Greene: It might be interesting to do that.

Senator MacDonald: There was a question raised earlier about the board of directors being more of an advisory board and, of course, we're responsible for the board of directors; the government is.

We had another witness before the committee, and I will quote him: "We looked at the profile of the 12 people who currently hold the positions, the board of directors. — I'm not blown away, if you will, by their knowledge of new media and developing the budget envelope for Canadian business advertising."

Could you comment on that? Do you think the government is doing a good job at putting the right people on the board of directors?

Mr. Racine: The talent that we have on the board is broad. It brings all sorts of aspects of running companies around the board, including knowing the media landscape. We have some people around the board who know the work around the media landscape. Some have other talent that helps to run a company. I do think the government appoints good people who represent Canadians efficiently toward the CBC.

Senator MacDonald: But do they bring value in terms of managing the resource?

Mr. Racine: They do.

Senator MacDonald: Another question, in terms of managing resources: A phenomenon that has been a little more evident the last number of years in government circles is people retiring from their jobs, collecting pensions and being rehired on contract. This goes on in a lot of places. It is obviously a lot of expense. I'm just curious if you can give us insight as to whether there is much of this going on at the CBC?

Mr. Racine: I don't know if people are on pension and then are brought back to the CBC, but I could give you the information.

Senator MacDonald: You could find that out? Thank you.

Mr. Racine: Yes.

The Chair: I've got a few questions, if you don't mind staying on the conseil d'administration.

I know the answer, but I'm asking you because some people are listening. What was the role of the board in the hiring of the president of CBC?

Mr. Racine: The president is appointed by the government, as you know. On Hubert Lacroix's renewal, the board agreed with the government. Basically, they gave advice to the government to reappoint Hubert, but the government doesn't have to listen to the board.

The Chair: How do you "interface" as chairman of the board with the government? Heritage Canada? PCO? PMO? Where is your reference as chairman to talk to the government?

Mr. Racine: Mostly Heritage.

The Chair: At the ministerial level?

Mr. Racine: Yes.

The Chair: When you look at the transcripts, you nearly said that you approved his expenses.

Mr. Racine: I approve his expenses.

The Chair: When Senator Plett asked you the question before, you were leaning toward saying that, but someone cut you short.

Mr. Racine: I approve his expenses.

The Chair: So, the travel and all of his expenses, including the expenses that he had to foreclose because they had been over the limit?

Mr. Racine: Yes.

The Chair: They had been approved.

Another question that goes to the line of Senator Greene, I'm old enough to have been influenced in getting involved in politics by "Quentin Durgens, M.P." I love politics and one of the influences was in the 1960s; that was a big show in English Canada. I would pay to listen to that. If I don't have to pay you, I don't mind, I'll pay somebody else, but I would like to have access to some of those old products and I think there is a market value. For that market value to be worth something to you, it's like getting money through the cable industry. What good is it for you to get an extra hundred million through new revenue, if the government is going to be cutting it off? How do you guarantee that these new sources of revenue will not be taken away from you in government subsidies?

Mr. Racine: Historically, the government hasn't cut our yearly parliamentary credits in the last 42 years except twice, and the last one was everybody, including us, so I don't expect the credits to change.

Senator Plett: You said you approve the president's expenses and you had approved the expenses that he improperly claimed. Were you involved in asking for repayment of those improperly claimed expenses, too?

Mr. Racine: Yes, I was.

Senator Plett: By ordering him to do that, or did he come to you and volunteer that?

Mr. Racine: He came to me.

Senator Plett: Thank you.

Senator Housakos: I know in Mr. Racine's line of work an important demographic that brings in a lot of revenue is the age group between 20 and 35. He should keep in mind that whatever programming they do should be targeted to that group, just as a follow-up on Senator Dawson's and Senator Greene's suggestions.

My concern is in regard to revenue again. We're going back to the bottom line and, in particular, because I think that the objective here on everybody's part is to make sure there is a viable national broadcaster that is there providing Canadian content. That's my main concern as well.

All I've heard from the proponents of positive arguments for the CBC is that the only way to fix this is for the federal government to give more money. Even my colleague Senator Eggleton in his line of questioning keeps referring to the federal subsidy more than anything else. I appreciate that; he's a born-again CBC supporter because, when he was involved with the previous government, I can recall they cut the CBC budget brutally.

An Hon. Senator: Oh, oh.

Senator Housakos: I think it was almost $3 to $1 based on the current government.

My bigger concern than that, Mr. Racine, is that the revenue coming in from advertising is dropping at a quicker rate in the last few years than even the subsidy cuts. There is compression going on in government and there will continue to be compression regardless of which political party is in power.

What is the board's vision of how you can stop the bleeding in terms of the loss of revenue? "Hockey Night in Canada" is inevitably going to be a big element on the CBC's side.

I'll give you all my questions. My concern regarding Radio-Canada and the CBC again, as a Quebecer I think Radio-Canada provides an important service to francophone Canada. Their ratings are respectable. My concern is that whenever there is compression at CBC/Radio-Canada it has been done across the board. From the board's perspective, have the cuts been done equitably? Where I come from in business, where a division is not performing — and you appropriately pointed out that when a show doesn't perform you change it.

From the board's perspective, are the revenue shortages greater in the last few years at CBC compared to Radio-Canada? I assume the revenue flow of what's coming in to Radio-Canada should be a little bit higher based on its ratings than the CBC English. You can comment on that.

Third, can you tell us how many employees at CBC/Radio-Canada are collecting a pension, are retired or have been retired for a number of years, yet are still at CBC/Radio-Canada on contract doing the same work they were doing prior to being retired except now they are contractual employees?

My last question is in regard to the ombudsmen. We have met both ombudsmen from CBC/Radio-Canada. I think they are doing a very admirable job. My concern and the concern of this committee is that we talk about arm's length: They are hired by the president; they report to the president; and I find that incredible. There is absolutely no distance between the people they are investigating, so to speak, and the people they report to. Wouldn't it be more appropriate for the ombudsmen to be reporting to the board of directors who have that responsibility? Those are the four questions.

Mr. Racine: I'll go in reverse order. I'll start with the fourth one.

As much as the two ombudsmen are hired by the CEO, he informs us of whom he's going to hire and why when it happens.

As for the reports, the reports are sent to us. They come to us, and they do their yearly report with the news head there. We also have an in-camera with the two ombudsmen. Sometimes mistakes are made by the news department, and we take this very seriously.

Right now they are appointed by the CEO, but we're informed on this. I think he does a diligent job of finding the right person to do this, and then they report to us. Really the report is for us, not for him.

Your third question I already answered, which was Ð

Senator Housakos: Regarding the pensions.

Mr. Racine: Yes, I will provide the information.

Senator Housakos: The second question was with regard to Radio-Canada and CBC and the fact that when there are cuts being made across the board, I think Radio-Canada gets penalized unfairly.

Mr. Racine: It's a very good question. In the last few years, we have made cuts two or three times. When we have to make cuts, we don't look at French and English as much as we look at local news, vis-à-vis what we do on TV.

There is a saying that French gets 40 per cent and English gets 60, but French gets more than 40. They do great things, and they deserve some money. We look at the English side, and we invest where we feel that investment is needed and where the services are needed.

I must say that we don't look at this from one or the other; we look at all sorts of services. As much as some services are very strong, local news is something that we don't want to cut, but they get some cuts because everybody gets a piece of that.

[Translation]

Senator Housakos: Do you agree that Radio-Canada's role and mandate are different from those of the CBC? Do you agree that the client base, objectives, competition and the market are different?

Mr. Racine: Yes, I agree.

Senator Housakos: I have always said that the government might want to consider the possibility of creating two independent entities — one serving French Canada and the other one serving English Canada — because the markets and the objectives are completely different. What do you think about that?

Mr. Racine: Historically, the two networks have had little contact. However, with today's technologies, they increasingly have to work together. They each have independent programming, but using the same infrastructure results in tremendous efficiencies and synergy. The two networks are increasingly seeing efficiencies in this approach.

Of course, those efficiencies will benefit them, as the objective is to reinvest as much money as possible in content. If the two entities had separate infrastructure, the cost would be much higher.

The Chair: I have another question on the same topic. When Radio-Canada lost "La Soirée du Hockey," you cut almost the entire Radio-Canada sports team, and that had no impact on English Canada. However, when the CBC lost "Hockey Night in Canada," you probably know that this had an impact on Radio-Canada in Moncton and in Saint-Boniface.

Although there is no balance between the francophone and anglophone networks, something was certainly done differently in this case and had a distorting effect on francophones.

Mr. Racine: The loss of hockey resulted in many job cuts in Toronto. The sports team has decreased in size significantly, as there is no more hockey to cover. I don't know what the situation is with "La Soirée du Hockey," as I was not there.

I will summarize this in broad terms. The loss of hockey is a loss of 375 hours of Canadian content provided through "La Soirée du Hockey." I want to remind you that, if we had kept the rights to broadcast hockey, the cost would have been higher.

The Chair: I can assure you that none of the witnesses who have testified before the committee objected to that loss.

Mr. Racine: I want to point out that the loss of the hockey revenue is a loss of 375 hours of television that cost us almost nothing. Hockey was revenue minus the spending, and that came to zero, since we had 375 hours of free television. We also had a fantastic platform for selling our content.

I do not agree with people who are saying that the loss of hockey had repercussions. Proportionally, the cuts on the French side were not higher than those made on the English side.

[English]

Senator Plett: My first question is supplemental to what Senator Housakos talked about when he asked about the ombudsmen.

We had the ombudsmen here a few months ago, and I asked the English-side ombudsman a question with regard to some of the ways in which she worked. After I explain what I asked her, my question will be whether or not the board sets any parameters at all in how the ombudsmen work, or whether she or he would decide entirely how they handle cases. You said that you are very concerned with proper reporting.

I raised an issue with her where I felt an individual had been slandered on "The National," which is fairly important. A complaint was filed. I asked the ombudsman if, in a situation like that, she would interview both the journalist and the complainant. Her answer was, no, she would interview the journalist. I found it strange that she would interview one side of a complaint and not both sides. Even in a court of law, both sides can present their case.

Would you be involved in that type of policy, where the ombudsmen might not necessarily interview both sides?

Mr. Racine: The terms of reference of the ombudsmen are approved by us and were redone by most of the current board a few years ago. We hired a consultant a few years ago and we looked at everything that was done almost everywhere, because we felt that we needed to look at this. The ombudsmen follow a book on how they act. We looked at those terms of reference, and we've looked at all sorts of ombudsmen around the world: in private and public companies, in the media and outside of media. We changed a few details, but we approved new terms of reference, which they are using currently.

I don't know the specifics about what you are using as an example, but I think they are doing a good job. It's not easy. The two ombudsmen have a tough job and they do fairly well; I'm impressed. I must say that the two that we have right now are the best I've seen so far.

Senator Plett: Are those terms of reference public?

Mr. Racine: Probably. I don't know, but probably.

Senator Plett: I would like to know if they are public, and I would like to know how I can get them.

The Chair: That will be passed on to the clerk, who will pass it on to the members.

Senator Plett: I have one more question. In your statement, you say by 2020 there will be 1,500 fewer employees at the corporation. I will use an illustration first.

We've travelled around in our study. We were in the big tabernacle in Toronto, a 10-story building, and we were across the country in Halifax and toured that facility.

Mr. Racine: The new one?

Senator Plett: No, the old one. What they showed us there was something that was new, a production studio that they spent about $800,000 on. I believe that was the number they had spent. As a result of spending $800,000 and building this production studio, they needed six fewer employees. Staff reductions are not always as a result of government cutbacks, but may be as a result of efficiencies. In this case, I think they would be. With those six employees, that $800,000 would be made up in a year or two. I want to commend them on that.

Further to that, when we were in Toronto visiting the 10-story building, I asked a question of the gentlemen who was touring us around. If CBC were building a facility today just for CBC, as that building had been designed for initially — now renting out space and that's great to get revenue — how large would your building be? He said five stories. Fifty per cent of the size it is now. I know CBC is trying to get rid of much of their property, and renting.

Is all of this reactive to the $115 million less you are receiving through appropriation, or is much of this because CBC and you, as the board chair, decided we need to tighten our belts and start becoming more efficient? Because there are a couple of ways you are becoming more efficient. Are they a result of having to because we don't have "Hockey Night in Canada" and we are getting $115 million less?

Mr. Racine: I was the first board member to be appointed chair of that real estate committee. Real estate is a big cost to the CBC. If we would rebuild the CBC, we would obviously not have that place in Toronto and in Montreal, because in today's world, we don't even need half of the building in Toronto.

In Halifax, we went from 160,000 or 180,000 to 38,000. I have a lot of examples where we don't need it. In Saskatoon, we went from 30,000 to 5,000 square feet, and we still have a news broadcast in a studio there.

Senator Plett: I want you to leave Winnipeg alone.

Mr. Racine: In Montreal, we are going to reduce, going from 100 to 30, 1.3 to around 400. That's the plan. But is it reacting? No. We started that process before the drop in 2011. We started in 2010. The board and management felt, by visiting the studios, this was not efficient anymore. When you tour Montreal and Toronto you feel that we're big and not efficient. When you go to Halifax or Saskatoon, you feel that we're efficient and that we could never be more efficient than this. Obviously, we need to change every place that we have, and we're doing so.

Senator Plett: When you're done with this program, do you have any idea how much money a year this will save CBC?

Mr. Racine: I should know that number. I will get you the number, but I have that number. I'm telling you we're following that number. We had that number in 2011 and we're going there. We're going to be there. By 2019, I think we're going to finish that program. It obviously takes a long time.

The Chair: We have 15 minutes left. I have four senators on the list for second round. I'd like you to share that time as honourably as you can.

Senator Eggleton: I'll share with Senator Housakos by saying, yes, past governments of all political stripes have all cut, but the current cuts by this current government are going far too far. I hear you saying all the time to live within its means, but it's pretty lean and mean.

Your statement says "government-wide restraint, together with a broken advertising model." Let me talk about the broken advertising model. If you had your druthers, as the old saying goes, would you prefer there be no advertising on CBC?

Mr. Racine: No, I think that advertising is good. The mix of having different sources of revenue is very good. It keeps us on the edge. It's good. I think our model is very good.

Senator Eggleton: Is it cost efficient now that you've lost hockey? Some of the numbers I saw earlier indicated that you're barely breaking even between the costs and the amount of revenue you're taking in. Is that not correct?

Mr. Racine: No, no. You mean the cost of sales?

Senator Eggleton: Yes, I guess so, if it's relevant to CBC English language television?

Mr. Racine: We obviously reorganized our sales department to be more in line with our objective and, no, we're pretty good.

Senator Eggleton: Pretty good, but you say it's a broken advertising model, so how are you going to fix it?

Mr. Racine: You're talking about the costs of sales. You asked me —

Senator Eggleton: I'm taking your statement.

Mr. Racine: If you ask me, should we have advertising or not, I say, yes, we should have advertising. I think that the cables and satellite companies should give us some money for our main content, our main channel.

Senator Eggleton: Do you have any program to try to make up for the advertising loss, for example on "Hockey Night in Canada," or increase the advertising revenues in any other way? Are you going to do more advertising on radio, or what are you planning on doing?

Mr. Racine: We are not planning to have any more advertising on radio than on our first channel. We feel it's part of our mandate to provide national radio and local radio for free, so we're not going to change this right now, no.

Senator Eggleton: Okay.

Senator Batters: I want to briefly go back to the Jian Ghomeshi thing on a another matter dealing with the CBC board, but what I'm getting at —

Senator Eggleton: Point of order.

The Chair: Let's hear the question before saying it's out of order.

Senator Eggleton: She said she's going back to the Jian Ghomeshi thing.

The Chair: If it's process —

Senator Batters: It is process.

Senator Eggleton: I have a point of order to make and that is we keep getting away interest the terms of reference that are set by the Senate on this study. The Senate study has to do with the future of public broadcasting. I can read it out for you. It's at the beginning of every memo all the time. What we are constantly doing is dealing with day-to-day management matters, or dealing with auditing questions. We'd love to be auditors, I guess. This is just going beyond what the terms of reference are.

Senator Batters: My point of view is —

Senator Eggleton: I object to it.

The Chair: I want to make it clear; I've said it before. If it's the same subject, if it deals with the process —

Senator Eggleton: I think it's an issue, but not for this terms of reference.

The Chair: If it deals with the process of how the board reacts, the future of the CBC is in the hands of the board. If the board is perceived as mishandling issues as important as that one, I don't want the details. I would respect the fact, but if it deals with the process, I will let you continue the question, but if it doesn't deal with the process, I will tell Mr. Racine that he doesn't have to answer.

Senator Batters: I just want to say —

The Chair: You can make a comment, too, please.

Senator Plett: Chair, Mr. Racine very clearly, when Senator Batters asked the first question, referred to the celebrity status, I believe, and certainly because there is a celebrity status here I think it is different than just simply how they would have dealt with any regular journalist on the street. This is of interest to the entire country in how CBC handles their management and their people, so I think it is very relevant to this study.

Senator Batters: Further to that, I think that this issue probably received more attention than any other CBC issue in years, and so I'd say it's critical to the future of the CBC and the credibility of the CBC to get answers about this.

The Chair: And your question is?

Senator Plett: Ask your question.

Senator Batters: When did you and the CBC board first find out about the serious allegations about Jian Ghomeshi, and what did you and the board do about this when you did find out?

You indicated earlier that the full board meets regularly eight times a year, and you also indicated to us tonight that the board was advised hours before Jian Ghomeshi was dismissed. Could you please deal with those particular two questions? Thank you.

Mr. Racine: We were advised a few hours before, and at the next board meeting we got a briefing about what happened and the appointment of our special investigator — what management did, basically. We were briefed on it at the next board meeting. We asked some questions. The board is happy about how the management handled the situation. That's it.

Senator Batters: That's the first time you heard, a few hours before?

Mr. Racine: Yes, we never heard about this before.

Senator Greene: Just one not-so-simple question. Assuming that Canadian content or achieving good Canadian content is what we're all after — it's the Holy Grail of Canadian broadcasting — do you think that Canadians, Canadian taxpayers, but all Canadians, would achieve more bang for their buck if the money that was spent by Parliament on the CBC, which is about $800,000 a year now, probably something like that —

Mr. Racine: A bit more than that.

Senator Greene: $850,000?

Mr. Racine: No, $950,000.

Senator Greene: Wow, jeez, $950,000.

Could that be better spent by providing it to content providers through the Canada Media Fund or through Telefilm or some organization rather than to the CBC, which spends a lot on management, et cetera?

Mr. Racine: No, I don't think so. As much as it is perceived that we spend a lot on management, the vast majority of our investment goes towards content.

I'm not saying that we're perfect. I'm just saying that the vast majority of our investment —

Senator Greene: How much? Out of that $950,000, about how much, if you could break it that way, do you think would go to Canadian content providers for stories?

Mr. Racine: I don't know. I could provide you the number. Instead of guessing, I will provide you with the number.

Senator Greene: So, why do you think that we need the CBC, as it currently is, to be a Canadian content provider?

Mr. Racine: I think we need the CBC for all sorts of different reasons. I think that it showcases Canadian talent; it provides local, national and international news to Canadians.

Senator Greene: So do the private channels, but theoretically you could make the private channels show more Canadian content through regulation.

Mr. Racine: They provide less than us.

Senator Greene: They do now, yes, but they would not necessarily in the future.

Mr. Racine: The privates are running a business and, if the business is better to buy U.S. content and put it on their network and get advertising for it, they will do it.

On the opposite side, I think we have an obligation, and also that's why we exist, to provide Canadian content to Canadians and showcase Canadian talent. We're there to entertain and also to inform Canadians. That's why we exist.

Senator Greene: And you don't believe the money could be better spent in terms of Canadian content if it all went to Canadian content providers, producers, et cetera, who told stories —

Mr. Racine: This is what we do and it's where we're going. On the content side, we want to be the place where the organizations will choose the best producers in Canada to showcase their talent. This is what we're doing.

Senator Unger: Mr. Racine, my question has to do with pensions. According to the CBC/SRC 2013 annual report on the CBC pension plan, pension payments in 2013 were $263.2 million and pension revenues for that year were $104 million, of which the CBC/SRC contributed $58 million and employees contributed $48 million, which results in a deficit of $159.5 million. The CBC/SRC currently pays 9,454 pensioners. You probably know all of this.

With CBC/SRC's total advertising revenues declining, and although the corporation will be coming to a fifty-fifty split in the ratio, there is still a deficit. Within this context, how will you offset the current pension plan each year?

Mr. Racine: We have more pensioners than we have people providing the pensions, so that's why there is a big gap. When we reduce the number of employees and the pensioners aren't growing, the pension fund will go down, but that was planned many years ago by the pension board. We knew of that curve. From my understanding, the pension fund is doing well. In terms of total assets, it's going down, but it will go down as we have less employees.

Senator Unger: As pensioners decrease, you don't think this will come to a crunch at some further point in time?

Mr. Racine: Our analyses are not showing that at all.

Senator Unger: Even with the advertising revenues declining?

Mr. Racine: No, the pension for us is a cost. The pension is outside the CBC, so we pay the pension. The employees pay the pension, and the pension fund is not us. It's arm's-length from us. It's not under our responsibility. We appoint the president of the pension fund. We appoint some members. The employees appoint some members. We have a report annually, and the report shows that we're fine. That's what it shows in the report, too. That's what it says.

Senator Unger: Is there another report, other than this one?

Mr. Racine: No.

Senator Housakos: Chair, at the beginning of the meeting you tabled the resolution from the National Assembly, which I think we've all read. Was that tabled by you, chair?

The Chair: What I asked at the beginning was how come we were not told that the resolution had been sent. Senator Unger brought up the question of Quebec's involvement in defending francophone television outside of Quebec. I did research and, during that research, I came upon this resolution.

Senator Housakos: Has the Parliament of Quebec requested to speak or to appear before us?

The Chair: No, not at all.

Senator Housakos: In regard to this resolution, it's fantastic that there is a degree of unanimity and support for Radio-Canada. The only thing I can say to our parliamentary colleagues in Quebec is that, as much as they get up in arms whenever the federal parliament infringes on their jurisdiction, I think they should allow the Parliament of Canada to do its work.

Some Hon. Senators: Hear, hear!

Senator Housakos: If they're as supportive of CBC/Radio-Canada, maybe they can transfer a few hundred million dollars of the $9 billion equalization payments to CBC/Radio-Canada. The chairman would be happy to accept funding to help with the shortfall. That's my only comment.

The Chair: I'm still preoccupied with the process which resolutions like that don't have. There is no communication. Even though it had been received by the Senate, we were not informed that it had been sent to the Senate. I think that there's a process problem there, other than the fact that the only reason I even found it is that Senator Unger had asked me to do some research on Quebec's position on CBC outside Quebec.

Senator Unger: And this was a joint declaration?

The Chair: No, that was a declaration of the National Assembly. I did not find any joint declaration, yet.

Senator Unger: With Ontario?

The Chair: No.

Senator Unger: Okay.

[Translation]

The Chair: Mr. Racine, do you have anything to add before we wrap up?

Mr. Racine: I want to thank you for listening to me and for thinking about the CBC and its future.

The Chair: We are finishing at the scheduled time. Thank you for your patience. Colleagues, we will reconvene at the end of January.

(The committee adjourned.)


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