Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 8 - Evidence, September 24, 2014


OTTAWA, Wednesday, September 24, 2014

The Standing Senate Committee on Transport and Communications met this day, at 6:45 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.

[Translation]

The Chair: Today, we are returning to our study on the challenges faced by the Canadian Broadcasting Corporation in relation to the changing environment of broadcasting and communications.

[English]

Our witnesses for today are from the Canada Media Fund. We have Sandra Collins, Vice-President, Operations and Chief Financial Officer; and Stéphane Cardin, Vice-President, Industry and Public Affairs.

The Canada Media Fund was formed in 2009 and began operations on April 1, 2010, following a merger of the Canadian Television Fund and the Canadian New Media Fund. It was created by the Department of Canadian Heritage and the Canadian cable industry and is a public-private partnership.

[Translation]

The Chair: I invite Ms. Collins and Mr. Cardin to make their presentations.

[English]

Sandra Collins, Vice-President, Operations and Chief Financial Officer, Canada Media Fund: Good evening Mr. Chair and members of the committee. Thank you very much for the invitation to take part in the committee's examination of the challenges faced by the Canadian Broadcasting Corporation in relation to the changing environment of broadcasting and communications. To begin, we'd like to provide a brief overview on the Canada Media Fund.

The CMF was created in 2010 by the Government of Canada and Canada's cable and satellite distributors to foster, develop, finance and promote the production of Canadian content and applications for all audiovisual media platforms. The CMF guides Canadian content towards a competitive global environment by fostering industry innovation, rewarding success, enabling a diversity of voices and promoting access to content through public and private sector partnerships.

As you know, Digital Canada 150 was launched earlier this year by the Government of Canada to ensure that Canada is poised not only to embrace its digital future but also to assume a leadership role in a global digital world. Canadian content is identified as one of the five pillars guiding Canada's digital future, and the CMF is a key player in this part of the strategy.

[Translation]

Stéphane Cardin, Vice-President, Industry and Public Affairs, Canada Media Fund: Since 2010, the CMF has provided a total of $1.3 billion in funding to over 2,200 television and digital media projects. This in turn triggered $4.7 billion in production activity across Canada.

In 2013-14 alone, the CMF's program budget of $360.7 million dollars supported the production of 510 projects. For every dollar of CMF funding for new productions, $3.36 in production volume was generated.

The CMF delivers this financial support through two streams of funding

The experimental stream encourages the development of innovative, interactive digital media content and software applications. The convergent stream supports the creation of convergent television and digital media content for consumption by Canadians anytime, anywhere. This stream is dedicated to financing four underrepresented genres, which are dramas, documentaries, as well as children and youth and variety and performing arts programming.

[English]

Ms. Collins: A component of the convergent stream, the Performance Envelope Program is the main funding mechanism of the CMF. It represents 71 per cent of total CMF funding in the 2014-15 program budget. The objective of the Performance Envelope Program is to encourage partnerships between broadcasters, television producers and digital media producers to create convergent content that Canadian audiences can consume at any time and on the device of their choice. Through this program, the CMF allocates funding envelopes to English and French broadcasters in an amount that reflects their track record of supporting and airing Canadian programming. Performance envelopes are calculated based on five factors: audience success for original, first-run programs; total viewing of all eligible programs, including repeats; historic performance; licensing of regional productions; and the investment in convergent digital media content. Broadcasters commit these funds to Canadian projects, but the actual funding is paid directly to the producer.

In 2014-15, a total of 40 broadcast ownership groups and independent broadcasters received performance envelopes. CBC/Radio-Canada receives the largest amount of funds since they broadcast the most original Canadian content from the four genres the CMF supports.

Mr. Cardin: CBC has received an average of 33 per cent of performance envelope allocations to English broadcasters in the last four years, the largest share in the English market. In 2014-15, CBC received an allocation of $53 million to trigger programming in the four genres the CMF supports. Over the last four years, CBC received a total of $249 million in performance envelope allocations.

[Translation]

Radio-Canada has also received the largest share of performance envelope allocations to French broadcasters, an average of 38 per cent in the last four years. In 2014-15, Radio-Canada received an allocation of almost $31 million. Over the last 4 years, Radio-Canada received a total of $136 million in performance envelope allocations.

[English]

In addition to the performance envelopes, the CMF offers other targeted funding programs to meet various elements of its mandate. Since 2010, CBC-licensed programs have accessed an additional $6 million per year on average from these programs, mostly incentives designed to support regional productions and digital media content.

[Translation]

Radio-Canada is a major commissioner of French language programming from outside Quebec that receives funding support from our Francophone Minority Program. Mostly as a result of this initiative, programs licensed by Radio-Canada have accessed an additional $8 million per year on average since 2010.

Thank you for your attention. We welcome any questions you may have for us.

Senator Demers: Ms. Collins and Mr. Cardin, thank you very much for your clear and wonderful presentations.

[English]

The CMF traces its history to 1995 and the Cable Production Fund. What have the significant changes in broadcasting been over the past two decades of your history?

Ms. Collins: That's a pretty big question, the last two decades. If I understand your question correctly, it is what has changed with the fund.

Senator Demers: What have been the most significant changes over that time?

Ms. Collins: Certainly, the advent of the specialty networks. The number of broadcasters is significantly different from when the funding was initially established. That would be one of the most significant changes in the broadcasting environment, and, certainly, the other, I would suggest, would be consolidation.

Mr. Cardin: Absolutely. I agree with both of those statements. I would say that it varies very much per decade. In the 1990s, very much in line with what Ms. Collins has already mentioned, there was a significant increase in the number of television services available in Canada, both specialty and through satellite, and there was consolidation, for sure. Particularly since 2000, I would say it's everything that is right now being discussed in the context of the Let's Talk TV hearing at the CRTC, and that is the competition to television from other sources of potential content viewing, namely over-the-top services and content offerings through the Internet — much more competition for eyeballs, if you wish to put it very simply.

Ms. Collins: I might add that, on the distribution side, it has changed significantly as well, as far as how people are viewing. Many people initially were only viewing over the air through antenna. Then, it started to be cable. We've seen, over that time also, direct to home, and now people are often receiving through IPTV, within the regulated arena anyway.

Senator Demers: Not to put you on the spot, but it is a success story when I look at some of the things here since 1995 and how you've progressed. It was more on that, and I thank you very much for that.

Senator Eggleton: Thank you for being here and for your comments. Now, amongst your comments, you talked about CBC receiving the largest amount of your envelope allocations for your four genres, which, you mentioned earlier on, were dramas, documentaries, children and youth, variety and performing arts programming, on both CBC and Radio-Canada. I'm more interested in the impact or the outcomes or the results of that money. We've been hearing from some representatives about the decline in the eyeballs, if you want to call it that, on CBC. I'm focusing on the CBC, naturally, because that's the subject of the study here; I know you have a broader mandate. There are fewer eyeballs on the CBC, on Canadian content, aside from the hockey, which is now in the past. So how much impact is this really having?

Some people have also come to the committee and said that they don't think the quality of the programming is what it used to be. Isn't that what you're supposed to be contributing to? Are you not concerned that this money might not be spent properly?

Mr. Cardin: I'll segue as well into the follow-up from Senator Demers. I do think that, yes, it has been a success story. In the French market, to start, I think there is consistency with the number of programs that achieve significant audiences on CBC and other broadcasters, regularly, audiences of 1 million and more.

However, part of the success that we've seen over the last decade, in particular, is on the English side, where we're starting to see some movement. A significant number of Canadian shows, particularly Canadian dramas, are now reaching more than 1 million viewers, shows like ''Republic of Doyle,'' ''Murdoch Mysteries'' and so on. I'm sure Ms. Collins has some statistics here. She'll be able to provide some examples. In the aggregate, the share of viewing to Canadian programming in those genres that we support has also been increasing. We think, in terms of quality, if you want to equate that to a certain extent with budgets, the production budgets are still significant, and we find that those shows are reaching audiences in an increasing number. I'll let Ms. Collins provide details as well.

Senator Eggleton: I'm talking about CBC, and I should have qualified my question. I am talking about CBC English because I know there is much more success with this on Radio-Canada.

Ms. Collins: Quality is a subjective point, but if you say that the program is of a high quality, presumably they are able to attract and retain viewers.

We looked at a number of CBC dramas in particular over the years, and when we examined viewing up until the end of the last broadcast year, which is based on an August 31 year-end, if we look at original first-run drama, CBC was number one and carrying a share of 42.7. That's in CMF-funded productions, which was the highest of any network. We would argue that it in fact is still quite successful.

Just to give you some specific numbers, shows like ''Murdoch Mysteries'' in the most recent timetable is 1.1 million viewers, has been 1.2 million viewers, and we see 1 million as the benchmark of success in the English market in dramas. If you hit 1 million, we consider that a success.

Other shows that have done well include ''Air Farce''; their New Year's Eve special, for example, has consistently about 1.2 million viewers. ''Heartland'' has done well. Rick Mercer holds at 1 million viewers regularly. So there are quite a few successes in the English drama market, just looking at that genre of production.

Senator Eggleton: Looking at something else that is quite current, in January 2012, according to news reports, the former chairman of the CRTC stated that ''Internet and wireless technology has disarmed federal regulators of their weapons to protect cultural identity.'' Just in the past week, we've seen in CRTC hearings Netflix thumbing its nose at the request of the chair of the CRTC. What should we be doing about that? What do we do about Canadian content as it relates to what we call ''over-the-top broadcasters''?

Mr. Cardin: What we said in the context of the proceeding, to try to summarize it, was that while we recognize the importance of granting choice and flexibility, if you look at that from a systemic perspective, given that the chair pointed to it in his introduction, we're financed about 30 per cent from the federal government and 70 per cent, or along those lines, 65 maybe, from Canadian cable and satellite distributors. Any changes that would impact the revenues of those cable and satellite distributors would in turn affect our capacity to support Canadian programming. If the cable and satellite distributors' revenues diminish because of ''skinny basic'' and other proposals that were before the commission, there would be an effect on our ability to support content. It basically just reminded the commission — well, they are very aware of it — that our role is there to support Canadian programming and that it is tied to the extent of our program budget.

Senator Eggleton: Are you saying, in effect, that Netflix and other over-the-top broadcasters should also be contributing to your fund?

Mr. Cardin: We did not say that they should be regulated. What we said was that our mandate is to ensure that Canadian content is available on all platforms and that there were possibilities for us to come to some sort of specific programming or arrangement with OTT providers where they could trigger potentially our access to our funding in exchange for a contribution to the system. But we weren't talking about necessarily regulating a set percentage or, for example, imposing spending requirements on them. We think there is a possibility of arriving at a form of agreement through perhaps a more flexible means.

Senator Eggleton: A negotiated arrangement?

Mr. Cardin: Yes, in essence.

Senator Eggleton: Thank you.

Senator Batters: I'm not usually a member of this committee, so excuse me if I ask anything that is widely known to everybody else here.

When I was listening to your opening presentation, what struck me is the huge amount of dollars involved here. Am I correct in assuming you were talking about four different sources that CBC receives? From the first one, you were talking how they receive $249 million; then you talked about Radio-Canada receiving, over four years, $136 million; plus then since 2010, you talked about an additional $6 million a year, so $24 million over that time frame; and then, for Radio-Canada, an additional $8 million a year, or $32 million. All of those amounts are additional. Is that right?

Mr. Cardin: That's right.

Senator Batters: When you were speaking to Senator Eggleton just now about where your money is derived from, you said that 30 per cent of that money comes from the federal government. That brought to my mind that, in essence, then the CBC not only receives the amounts that we all think of very directly as being received from the federal government but also receives $100 million, approximately, over that sort of time frame?

Ms. Collins: Just to recap, yes, the fund receives about $134 million from the federal government. This year, we anticipate receiving about $217 million from the cable and satellite providers; and then we have miscellaneous sources of revenue totalling about $366 million. When you look at the percentage of the total funds that we say that on average CMF receives, yes, they do receive a portion. We commingle all the funds, so we don't refer to ''this one gets some cable and satellite money,'' et cetera. It's just one pool of money.

Senator Batters: We don't look at it like that over here.

Ms. Collins: No, I understand, but a portion of that would be the federal government support.

Senator Batters: For CBC plus Radio-Canada, what is the approximate amount per year that they receive from you out of your funds in total?

Mr. Cardin: Again, here in the presentation, we split it by language market. Because the performance envelopes are by far the largest program, about 70 per cent, it would be about 33 per cent or 34 per cent in the English market, and in the French market, it would be approximately 38 per cent.

Ms. Collins: Out of what we allocate to television.

Mr. Cardin: Very good point. We do allocate. I spoke to the experimental stream in our opening remarks, and it has a budget of $39 million.

Senator Batters: The vast majority goes to television.

Mr. Cardin: Ninety per cent goes to convergence.

Senator Batters: Senator Eggleton was touching on this, but I want to hear more about it because it is getting to be a big part of the television marketplace, things like Netflix. Friends of mine don't have cable anymore; they just use Netflix to access television.

Can you speak more about that? What is the position of the Canada Media Fund regarding these virtual private networks that Canadians use to access Netflix U.S. services? Can you explain how those are used, and are Canadians who would use it in that particular fashion, in your opinion, breaking Canadian law to do it that way?

Mr. Cardin: To be quite honest I don't think I have either the technological or the legal expertise to speak on VPNs. We know just from reading trades that some Canadians do. I couldn't fathom a guess as to what percentage of Canadians do that.

We do know that the number of those who are members or subscribers to Netflix Canada is growing very rapidly, particularly in the English market, less so in the French market because of competitive offerings like illico from Vidéotron and Tou.tv from Radio-Canada.

It will be interesting now to see what impact the advent of some Canadian services will have, like the shomi service from Rogers and Shaw and the new service that Bell is scheduled to launch in January.

With respect to the VPNs, we really can't answer. Regarding Netflix, Netflix does offer Canadian content. What we hope is that Canadian content will be available on as many platforms as possible.

Senator Batters: So you don't have any statistics about Canadian Netflix, what percentage of the market that's getting to be at this stage and how that might have increased over the last few years?

Mr. Cardin: I don't have them with me now. I would be very happy to provide them to the committee subsequently because we do track that. And I believe — I will just go out on a limb here — that in the aggregate now about 28 per cent of Canadians are subscribers to Netflix.

Senator Batters: That's significant. Thank you.

The Chair: Maybe we can see if we got those numbers in previous testimony, and if we have them, we'll make them available to the members of the committee.

Senator Housakos: Thank you to our guests. Can you explain to this committee what your experience has been when dealing with the public broadcast corporation in comparison to private sector broadcasters in terms of culture, approach, promoting Canadian content? And also can you explain to us the methodology that leads you to choose one project over another?

It seems to me that CBC/Radio-Canada has received a disproportionate amount of the funding that you guys have been doling out over the last few years. Now, has that been the case because they happened to come forward with the best proposals for Canadian content programming? Is it because private sector Canadian broadcasters haven't focused on a sufficient number of proposals towards the CMF organization? Is it that at the end of the day they don't find it at all profitable for them to invest in Canadian broadcasting? I would like a little bit more feedback from you on the methodology, how you choose the projects and why at the end of the day the CBC has gotten such a disproportionate amount of funding.

Mr. Cardin: That's an excellent question, and perhaps we should have made clearer in our opening presentation that the model that we use through the Performance Envelope Program, which represents about 70 per cent of our total program budget, is one where the broadcasters select the programs that they're going to bring to the fund. We are not involved in the selection process at all, as long as the projects meet our eligibility criteria.

So we're not involved in any kind of selective decision making, and that system applies to all broadcasters — public, private, educational, the 40 broadcasters that Sandra mentioned that have access to the program. We employ a methodology that is very much objective and based primarily on audience success.

Again, that's what we did mention in our opening remarks. There are slight differences between the English and French market, but in a nutshell, 55 per cent of the calculation is based on audience success of the programs that the CMF supports. Ten per cent of it is based on how much the broadcaster provides in terms of licenses to digital content. In the English market, 20 per cent is based on what they license through productions that are produced by regional producers, so in the English market outside of the Greater Toronto Area. And another part of it is based on what we call historic performance.

I will leave it to Sandra to explain the system more, but the important thing is to say that it is not a selective process and it's a process that is based on performance, audience performance specifically.

Ms. Collins: To give an example, when we calculate the envelopes, all dramas funded by the CMF compete with each other for a share of the drama pool. Whether it's ''Saving Hope'' coming from CTV or ''Murdoch Mysteries'' from CBC, the amount of audience that each of those shows achieve, they compete with each other for a set pool of money. It's a competitive exercise.

So if CBC is gaining more audience on a particular show, or less, it impacts the amount of funds that they will receive; and with audience success carrying the greatest weight, it's really partly because CBC has such a great reach as the public broadcaster versus, you know, if it's a show that's aired on a specialty channel, it will not have the same amount of reach, same potential even. So that influences a lot of why they garner such a high portion of the audience success pool.

We then calculate that for variety and performing arts where they also do very well, shows they've done recently like ''Battle of the Blades,'' et cetera, and then children's and youth and documentaries, and then we tally all of it up. It is very much a zero-sum situation. For CBC to gain more of a share, one of the other broadcasters has less of a share, and it's recalculated every year. The vast majority of the data is drawn from Numeris, what was formerly known as BBM. So it's the currency of the industry on the basis of which we calculate the bulk of the envelope.

Senator Housakos: But the comparison is done vis-à-vis all programs that are CMF-funded, right?

Ms. Collins: Exactly. We only compare against other CMF-funded programs.

Senator Housakos: Are there any CMF programs in the last two or three years that were rated No. 1 nationally across the board when put up against other across-the-board competition? Has there ever been a Canada Media Fund program that was rated No. 1 in the BBM ratings?

Mr. Cardin: In the French market, absolutely.

Senator Housakos: In the English market?

Mr. Cardin: The first example that comes to mind is ''La Voix,'' the French-language version of ''The Voice''; ''Star Académie,'' same thing. In the English market, number one out of all shows, probably not, but close, but the English market depends on whether you're counting things like the Super Bowl or the Olympics.

Senator Housakos: I'm just saying across-the-board ratings.

Mr. Cardin: Well, the answer would be no, but again, if you're comparing with similar shows, like dramas, then there would be instances where the Canadian shows would be having audiences that are comparable to U.S. dramas or U.S. sitcoms — to U.S. dramas for sure.

Senator Housakos: I have two more questions before I turn it back to the chair.

Can you comment on how you view the CBC going forward in terms of its structure right now, if it is responding to the need of promoting Canadian content in an appropriate fashion? What I've seemed to come across as a repeated message from producers, actors, people involved in the Canadian content producing business is that they think there's a need for a Canadian public broadcaster, obviously, because it's the only game in town for them, but repeatedly I've heard their message that they don't feel that the CBC is responding effectively to their needs and carrying enough Canadian movies, Canadian shows. That seems to be the underlying message that I keep hearing from people in the business of producing Canadian movies and Canadian content.

You guys are in the field. You're dealing with this on a daily basis, and my question to you is maybe you can give some comments to this committee: What can we do more than what has already been done as a Canadian society to respond to our artists' needs, to our movie makers, to our producers? The message seems to be that the CBC is not necessarily fulfilling its mandate in carrying all these great movies that we're producing, apparently, on a regular basis.

Mr. Cardin: I don't think we're in an adequate place to make a qualitative assessment of how the CBC is fulfilling its mandate or how it could do so better. For us, really, what we can contribute to this committee's study and analysis is essentially the facts that we've brought forth here, and would repeat to that effect. I understand that's what the committee may have heard from different parties, but in the universe that we support, which is production of Canadian content in four very specific genres, the numbers bear out that CBC is the broadcaster in both language markets that is supporting the greatest quantity of Canadian content.

Senator Housakos: Well, my question is, are they the right platform? What I'm saying is I think we have great Canadian actors and great Canadian producers and we can produce great shows. What I hear from a lot of them is they need the platform in order to get it across to Canadians. One of the roles of this committee is to study and see whether the CBC, where we're putting in over $1 billion a year as government and taxpayers, is supplying that adequate platform to them. You see the results because they speak for themselves. In French Canada they seem to be performing better for a variety of reasons; in English Canada, they're not. When you talk to producers in Winnipeg or in Edmonton who make movies, they're saying, ''You know what, we don't have a platform to get our movies across to the world.''

We call upon all witnesses to contribute in this debate. We're not going to hold you to whatever solutions or diagnoses of the problem you have, but I think it's important that everybody weighs in on this issue so we can come to some kind of consensus of where we go from here in promoting Canadian culture, Canadian content and making sure that the CBC is well equipped to survive well into the future.

The Chair: Was that a question? I have a supplementary so I wanted to hear what the supplementary is.

Senator Eggleton: I have a supplementary question. In response to Senator Housakos' first question, you said that you decide who gets this money on the basis of audience ratings, how many viewers they have. Well then what about new programs? What about ones that haven't been on the air yet? Do you not fund any of those? They don't have any audience experience at all.

Mr. Cardin: There are some new programs, whether they're one-off programs or whether they're a new series, and they generate audiences that are as high as returning series. When we do the calculation, it is all shows that are within the genres that we fund that enter into that calculation. As we said, we redo the calculation annually, and it's based on the audience figures from the prior broadcast year.

Senator Eggleton: No, I'm talking about brand new shows. CBC comes up and says, ''We've got this great idea here; we want to put this on the air.'' Nobody's seen it yet, so how can you make a judgment based on audience ratings?

Mr. Cardin: We will in the subsequent year when the audience data comes in.

Senator Eggleton: You won't fund it the first year then?

Ms. Collins: No. We will definitely fund it if it's eligible in the year. The CBC has a pool of money and it's up to them to decide which projects and how much to allocate to each of them. We calculate and they've earned this size of an envelope. They can choose to put it to a returning series or a new series. The amount that they allocate per is their decision.

When that new show goes to air, it probably replaces a series that's not returning and it will earn audience, and then it builds the envelope for the following year.

Senator Greene: Thank you very much. I want to get some more information about your numbers and what they mean.

With 33 per cent going to the English-language network and 38 per cent to the French, what you're saying, basically, is that 71 per cent of your funding goes to the public sector broadcasters; is that right?

Ms. Collins: No, our funds are split, in essence, two thirds English and one third French. For example, on the French side, the total amount of funding we have available for French language is one third of our total budget.

Senator Greene: Why did you pick a third? Why a third?

Ms. Collins: That's actually within our contribution agreement with the Government of Canada.

Senator Greene: Could you provide a larger time horizon than just four years? I would like to understand where it's been before and where it's heading.

Mr. Cardin: That, again, is a very good question because prior to the creation of the Canada Media Fund, when we were known as our previous incarnation, the Canadian Television Fund, as a condition, again, of the contribution agreement with the Government of Canada, CBC and Radio-Canada in their respective markets received a fixed allocation of 37 per cent of our funding.

Senator Greene: Why 37 per cent? Is there a reason?

Mr. Cardin: That's what was set in the contract with the Government of Canada. I don't know if that was based on some form of historic access prior to that but, as I was saying, when Minister Moore announced the creation of the Canada Media Fund, one of the important principles was that all broadcasters would compete on a level playing field.

That's why you can see, basically, since that change in the French market, Radio-Canada has pretty much held its share through its audience performance, mainly. In the English-language market we've seen a reduction from 37 per cent to 33 per cent.

The Chair: Through the good services of our library analyst, according to the testimony provided by the Canadian Media Production Association, there are 4 million Canadian Netflix subscribers or, in other words, equal to 30 per cent of Canadian households.

Senator Batters: In following up on some streams of thought that have come with some of my colleagues' questions, and again reading your opening statement, you talked about how you're dedicated to funding four under- representative genres, which are dramas, documentaries, children and youth, and variety and performing arts.

First, what category do shows like ''Rick Mercer'' or ''Air Farce'' fall into? Do they fall into the variety category?

Mr. Cardin: ''Air Farce'' in variety, yes. ''Rick Mercer'' is considered more of a comedy and has been included in drama.

Senator Batters: Drama?

Mr. Cardin: Yes, it's drama, and comedy shows fit in there as well.

Senator Batters: Looking at the factors that you have set out, the five factors you look at for your performance envelopes, primarily it's audience success, and then it's almost doubled down on that because you also talk about historic performances and an additional amount for that. I'm wondering, based on the criteria that you set out, how innovation gets rewarded with that. It's not specifically mentioned. From what you were saying to Senator Eggleton, I understood that perhaps it's the networks that are responsible for rewarding innovation and not the Canada Media Fund?

Mr. Cardin: Again, when the CMF was created, part of the guiding principles was that television programs, at least, were striving to achieve audience success first and foremost. The innovation portion of our mandate, I would say, is twofold. First and foremost, creating a convergent stream makes it such that we can't fund strictly a television program. A television program also comes with additional content or digital platforms or it also has to be offered on a platform other than television. Essentially, the innovation portion is in trying to reach Canadians through all of those different platforms, increased engagement over and above the television program by allowing the viewer to engage with additional content, Web series, games related to a TV show or an interactive website. That would be one portion of the innovation part of our mandate.

With the experimental stream that we mentioned, that program is focused specifically on driving innovation, but it applies to digital media content through a condition of our contribution agreement, to digital content, which would mean that in that program we support games, whether for consoles, PCs or mobiles, interactive Web series, e-books and even software applications in enabling technologies.

Senator Batters: Are you telling me that innovation does not really play a role in any of those things you just talked about for TV shows?

Mr. Cardin: In television, there is a role through the convergent aspect of our support to television. It's also hoped that in the experimental stream some of that innovation will find its way back into the more mainstream portion of the industry, and we've seen a few examples of that.

Senator Housakos: Does 100 per cent of the funds you give to whatever broadcaster go to production? For example, when you are doing ''Murdoch Mysteries,'' does 100 per cent of the funding go to pay actors and producers, or are portions of it used for other things?

Mr. Cardin: We support content at the development stage and at the production stage. We have specific programs for each of those. Development is essentially the script development and script writing process.

Senator Housakos: Regardless of who the broadcaster is, would they take a portion of the money and use it to promote the program as advertising on their network?

Mr. Cardin: Only a very small portion of allowable marketing expense is in the budget that we support. The vast majority of a broadcaster's marketing and promotion efforts do not receive any CMF funding. That's the same for all —

Senator Housakos: What would that allowable percentage be?

Mr. Cardin: In television budgets, and sorry for being technical, it's 3 per cent of what are called portions B and C of a standard budget. Portions B and C are essentially all of the production and post-production items. They exclude everything that is above the line: the stars, the director, the screenwriter and administration expenses. Essentially, it's the bulk of the hard costs to get a show made. We allow up to 3 per cent of those costs to be marketing expenses, no more.

Senator Housakos: Does any funding go into news content?

Mr. Cardin: No, none at all — no news, no sports, no reality television.

The Chair: That's what we have as far as questions are concerned. I would like to thank the witnesses for their participation. Honourable senators, I would like to move the meeting go in camera, with your permission, to discuss future committee business.

Thank you very much, Mr. Cardin and Ms. Collins.

(The committee continued in camera.)