CTF faces a struggle in 2007 due to cableco funding withdrawals

Attention was focused on the Canadian Television Fund (CTF) last week as Vidéotron ltée announced it was following in the footsteps of Shaw Communications Inc. and discontinuing its financial support of the CTF. If the flurry of press releases deriding the BDUs after the Vidéotron announcement are indicative of anything, it’s that an amicable resolution may be nowhere in sight. "We are a multi-stakeholder organization and every decision we make has to be treated as being fair and equitable by all of the participants in the system," Douglas Barrett, chairman of the CTF’s board, tells Canadian Communications Reports. "So having somebody say ‘We demand that you adhere to the commercial interests that we have and we’re going to withhold funds until you do,’ is not a language that we can deal with." As a sign of its resolve, the CTF issued a media release stating it had retained legal council following the actions of Vidéotron and Shaw. While Vidéotron’s January 23 announcement that it was going to withhold its funding to the CTF – $14.3 million in 2005 – garnered substantial media attention, the current showdown began in earnest late last year. On December 20, 2006 Jim Shaw, CEO of Shaw Communications, sent a letter to the CTF requesting immediate and fundamental changes to the mandate and governance of the fund, and announced that Shaw was withdrawing its financial support – approximately $60 million per year. In his letter, Shaw highlighted the support of the CBC by the CTF to the tune of over $90 million a year as one of his main issues with the fund, and argued that the "CTF has become nothing more than a means of subsidizing broadcasters, pay and specialty services and independent producers to produce Canadian television programming that few watch and has no commercial or exportable value." The CTF was created in 1994 by the CRTC, with oversight being passed to the Department of Canadian Heritage in 1996. The fund, which is used to foster production of distinctively Canadian, "quality" television productions, totals $250 million; $100 million of that comes from Heritage, with the rest coming from the cablecos and DTH providers – and Shaw, with both its cable and Star Choice satellite offerings, contributes twice. But whether the fund is accomplishing its goal is a subjective matter. "We just don’t agree that nobody’s watching the shows," says Barrett. "We think the evidence is very clear; we have lots of shows that achieve dramatic success, and not only that, but we think the audiences for Canadian shows have been…growing steadily over the past couple of years." Indeed, in 2004 the CTF began issuing funds under the Broadcaster Performance Envelope system, which rewarded audience-generating productions and simplified the administration process by putting more power in the hands of the broadcasters. " had been making headway in terms of a more market-based approach to authorizing various projects," says Peter Lyman, senior partner of the media consulting firm Nordicity Group Ltd. "A few years ago, before they had the envelopes, maybe had more of a case." He adds, however, that he understands the BDU’s displeasure about CTF money going to CBC programming, particularly from the side of Vidéotron’s parent company Quebecor Inc., whose TVA Group television network is in direct competition with the public broadcaster. But according to Ken Stein, senior VP of corporate and regulatory affairs at Shaw, the BDU’s objection goes beyond the quality of the programming being funded by the CTF. "We’re very strong supporters of Canadian cultural objectives," he says. "What we’re opposed to is subsidies going to companies that don’t need them. Why are we subsidizing CTV to do what it’s doing? I don’t get subsidized; nobody’s given me money to go off and roll out digital boxes or any of that kind of stuff….We don’t believe in subsidies, we never will believe in subsidies, but we strongly believe in Canadian culture and its objectives." Of course, Shaw and the rest of the BDUs are subsidizing programming for broadcasters like CTV through the CTF because it’s part of their conditions of license. Lyman reminds that the cablecos were required to contribute 5% of their annual gross revenues to the CTF as a means of avoiding cable rate regulation. But while the required annual payments seem to be binding, the fact that they might not be technically required until the end of August could put the CTF in a tight spot. Both Shaw and Vidéotron make their CTF contributions on a monthly basis based on guidelines established in CRTC Circular No. 426. The CTF’s Barrett says there’s a debate among regulatory lawyers whether the provisions of the circular have the same degree of enforceability as those of the regulations. Unfortunately, a lengthy legal battle over the enforceability of the circular will negatively affect Canada’s television production industry this year. "With the Shaw letter we had organized ourselves, because we’re close to year-end, to deal with the problem," says Barrett. "We had figured a way to use some resources we knew we’re going to be available next year to fix this year’s problem. And with the Vidéotron letter, we do not have adequate resources to deal with all the applications which we’ve already received for this year. There’s a risk for an absolute loss for this fiscal , and obviously a material challenge for next ." Certainly the timing of the withdrawals is damaging for the CTF, but with the fund constantly making strides to accommodate stakeholders, it’s curious what pushed Shaw to discontinue its payments now. Perhaps not coincidentally, six days before Jim Shaw sent his letter to the CTF a Federal Court of Canada judge ruled that Part II broadcast licence fees, which had been in place since 1997, constituted a tax. What’s more, since they weren’t levied by a Ways and Means resolution in Parliament, the Part II regime was unauthorized and beyond the powers of the CRTC (CCR, Dec. 20/2006). Since CTF contributions were also mandated by the commission, Shaw could be banking that the Part II ruling sets a precedent. If the BDUs otherwise had any notion of bringing the CTF to its knees altogether it was quelled last Friday when the Minister of Canadian Heritage Bev Oda announced a two-year renewal of the CTF. Says Stein: "That’s how it should be done: raise money through taxes, do it properly through Parliament, and put the money in. Decide how much you’re going to give the Canadian Television Fund and the CBC….That’s for government to decide." Resolving the current situation surrounding the CTF, however, could be for a job for the courts. In addition to the news that the CTF has sought legal council, the Canadian Film and Television Production Association called on the CRTC to take action in response to Shaw and Vidéotron, and in another release the CTF thanked "the cable and satellite companies, including Bell ExpressVu, Cogeco and Eastlink," for their monthly contributions. The industry associations picking sides and the thinly veiled jab at Shaw and Vidéotron are reminiscent of the battle that has played out in the media between Canada’s actors and producers (CCR, Jan. 16/2007). That, of course, has resulted in the current strike by the Alliance of Canadian Cinema, Television and Radio Artists. The CTF can only hope there’s a more harmonious resolution to its situation. "I think the best resolution is a scenario where…we can seek toward the mutual understanding and support of the importance of production of Canadian television in this country," says CTF president Valerie Creighton. "We’re very hopeful and optimistic."

CTF faces a struggle in 2007 due to cableco funding withdrawals

News | 01/31/2007 5:00 am EST

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