Allowing drug ads and eliminating Part II fees could help cash-strapped broadcast industry: CRTC chair

CRTC chair Konrad von Finckenstein told MPs yesterday his agency is doing everything it can to help cash-strapped broadcasters over the next year, but points out that other measures – including allowing drug ads and eliminating Part II licence fees – could generate more cash and in a shorter timeframe than any regulatory concession, including carriage fees. Insisting there are no “magic bullet solutions”, he said systemic changes are needed to deal with structural problems in the industry, although those changes won’t come into force until at least 2011. All the commission can do, he said, is ease the financial burden by relaxing licensing conditions through one-year renewal terms to allow conventional broadcasters to buy time. The CRTC chair and three other officials were summoned by the committee last week to answer questions about how the current economic meltdown is affecting the television industry. “Our current model is a jumble of differing rules for different categories,” he told the Standing Committee on Canadian Heritage. “What is required is not a piecemeal fix, but a systemic structural solution... this is not something that the commission will be able to do along. It is a process that will require everyone to step up to the table with bold and creative ideas.” Von Finckenstein denied that the broadcasters’ current woes are a result of bad regulation, pointing instead to a dramatic drop in advertising revenues, particularly from the automotive companies. As a quasi-judicial regulator subject to due process, there is only so much the CRTC can do in the short-term to ease the financial crisis in Canada’s broadcast sector. The immediate concessions it is offering are: $60 million in new funding through the Local Programming Improvement Fund for TV stations in markets of less than one million people (based on a 1% BDU contribution for the next year, although von Finckenstein said they would consider a higher amount after that time) Renew broadcast licences for one year and then for seven years on a group basis rather than a category basis Reduce levels of local, priority and independent programming for one year Allow a 1:1 ratio between Canadian and non-Canadian programming expenditures (for 1 year term, possibly extended for another 7 years) The CRTC has also cleared the way for broadcasters to charge BDUs for time-shifted local television. Those negotiations are currently ongoing and could generate an estimated $70 million in new money annually. BDUs were to start paying the distant signals in 2011, but von Finckenstein said the commission will use the April licence renewal hearings to look at ways to move up the date. Under pressure from Conservative MPs on why the commission rejected fee-for-carriage, von Finckenstein said he is not against the idea so long as it is justified and enhances local programming. The broadcast industry has estimated such fees could generate about $300 million annually. The CRTC chair said he had previously asked executives from CTVglobemedia and CanWest Global Communications whether they would commit cash from fee-for-carriage towards local programming and the answer he got was a “resounding no.” At one point von Finckenstein was asked by Conservative MP Rod Bruinooge whether he believed that new revenue streams from fee for carriage wouldn’t still “trickle down” to local broadcasting. “It would make them healthier, but would it trickle down, would it give you the content you want locally? I very much doubt it,” he replied. Von Finckenstein said he isn’t ruling out introducing fee for carriage following a broader review of the television industry beginning in April. But he said it would have to be considered as part of a broader solution for improving local programming in non-metropolitan markets. There are also non-regulatory solutions that can be considered, he added. “Pharma companies are not allowed to advertise so that could be a possibly,” he said (translated). “”You see those ads on US television so I don’t understand. We don’t allow our industry to benefit from increased revenue streams.” Direct-to-consumer ads giving detailed drug product information are currently illegal in Canada. Another potential source of funding is the elimination of Part II licence fees, described by von Finckenstein as “like a GST but only for broadcasters.” Part II fees amount to $100 million a year and are deposited into the government’s Consolidated Revenue Fund. The CRTC stopped collecting the fee in 2007, following the first court challenge by the Canadian Association of Broadcasters. That leaves about $200 million the broadcasters have set aside that could be used for local programming and other operations, said the CRTC chair. The Supreme Court of Canada has agreed to hear the case. “Every broadcaster carries on their books liability for Part II fees. Is there going to be a settlement—I think this is the ideal time to make a settlement—then that element of their books would come off. The books will look much better, they will be fewer liabilities for the government,” von Finckenstein said in an interview with reporters. The committee also wanted to know how new media is impacting the current television model, to which von Finckenstein replied that new media is a challenge for conventional television but stressed that its impact must be seen from a wider perspective through a national digital media strategy – a proposal that has been championed by the National Film Board.

Allowing drug ads and eliminating Part II fees could help cash-strapped broadcast industry: CRTC chair

Broadcast | March 26, 2009

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