HERI Committee Report

THE STATE OF
THE SYSTEM

Chapter 5
Canadian Programming

The previous chapter showed why today's television broadcasters are more aware of the need for high-quality programming than ever before. Indeed, the proliferation of television services has led to a situation where there is no longer a guarantee that programming will generate an audience by default. The consequence of this for Canadian broadcasters — whether in the private, not-for-profit or public sector — is that the production or purchase of high-quality programming that appeals to a mass audience is far more difficult and important than it once was.

The problem today's broadcasters face, however, is that the production of English Canadian programming that will attract a large audience has become very costly. This is because viewers, particularly in English Canada, have grown accustomed to American programs with high-production values such as The Sopranos, Frasier, The West Wing and Sex and the City. Further complicating matters is the fact that American programming is cheaper to buy and generates a higher rate of return for Canada's broadcasters than the purchase or production of made-in-Canada programming.

It should be pointed out, however, that this particular dilemma is hardly new. On the contrary, at the time of the last review of the Broadcasting Act in the mid-1980s, 98% of the drama and comedy that English-speaking Canadians were watching was foreign. Recognizing that this was a problem, the government, over time, has introduced a number of

programs and policy measures designed to reverse this trend, with some promising results. For example, as was seen in Chapter 4, the overall supply of original English Canadian drama and comedy has increased significantly since the 1980s, from 2% of all drama and comedy in 1984 to 17% in 2001. At the same time, there have been moderate increases in the overall viewing of English Canadian drama and comedy, from 2% in 1984 to numbers consistently in the 7% to 9% range throughout the 1990s and early 2000s.

But given the relative size of these viewership numbers — whether 1984 or today — it can be understood why many witnesses — particularly those from the creative sectors — expressed discontent with the current situation. Some suggested that the CRTC was to blame for having changed its definitions of priority programming with the release of its new television policy in 1999. Others argued that it was the nature of Canadian content definitions, and the complexity and contradictory nature of the system that has been devised over time to fund and support Canadian programming. Meanwhile, others argued that it was in part due to the fact that Canadian private broadcasters are beholden to the programming decisions of the American networks and are, as such, relegating Canadian programs to weekends and times of the year when Canadians are not watching. For these reasons, many creators were of the view that the Canadian production sector is in crisis.

In parallel with the above points were counterarguments raised by Canada's broadcasters and distributors, who pointed out that Canada's broadcasting environment is not just slightly, but far more complicated than it was in the mid-1980s. Moreover, several witnesses observed that it is not just one factor that is making it difficult to produce and attract Canadians to Canadian programming, but several in combination, not the least of which is the fragmentation of today's broadcasting landscape. For these reasons, Canada's private broadcasters were far less inclined to agree with the allegation that Canadian television is in crisis.

It is worth noting that for a variety of reasons, the emphasis in this chapter will tend to be on English-language television. This is not because French-language television is without its challenges. On the contrary, French-language television was not much better off than English Canadian television in the mid-1980s, with a high percentage of French-speaking Canadians watching dubbed American programming. Since that time, however, circumstances have changed markedly — so much so that,

today, the top 20 shows in Quebec are almost always made-in-Canada productions.

The reasons for the success in the French market are twofold. As witnesses told the Committee, French-language broadcasters realized in the mid-1980s that the way to break the dependence on American programming was to develop a star system and to produce programming which would permit French-speaking Canadians to see their stories and their communities. And, in parallel, there was a second reality, one which cannot be easily discounted. As several witnesses told the Committee, the francophone market benefits significantly from the fact that audiences prefer to see programming that was produced in their own language. By extension, this advantage has allowed broadcasters to focus their expenditures in ways that still permit them to produce or purchase popular programming. For these reasons, and others, much of the success that French-language television has enjoyed in recent years, will be exceptionally difficult to replicate in English Canada.

This does not mean, however, that lessons cannot be learned from this experience. On the contrary, as will be seen in Chapter 8, there are efforts already underway in the English-language market to borrow from the Quebec experience, not only to reinvigorate English Canadian programming, but to reinvent it.

But to a large extent, the differences between English and French television in Canada are secondary to the issues at stake in this chapter. Of concern here is that the bureaucracy has evolved in such a way that it has become a highly bewildering and exasperating experience for many of Canada's creators. Indeed, as this chapter will show, witnesses were at once eloquent and damning in their appraisal of Canada's support system for Canadian television programming.

With these thoughts in mind, this chapter focuses on the evolution of Canadian television programming policy in Canada. It looks at the development of Canada's programming policy, the ongoing refinement of definitions of Canadian content, the introduction of various funding mechanisms, and the changes in the regulatory regime for programming priorities and exhibition. In its concluding sections the chapter proposes a number of measures that will help ensure that distinctively Canadian programming, in French and English, of a high quality is funded, produced and viewed by Canadians.

Readers should note that this chapter does not address witness concerns with Canadian radio programming. Material on this subject is presented in Chapter 8.

Historically, the fulfillment of Canadian broadcasting policy — that is, the creation of high-quality and distinctive Canadian television programming — has been encouraged through one or more of the following strategies:

The emphasis among these strategies has varied over time to meet changes in technology, the marketplace and the preferences of Canadian citizens.

In the early 1950s, the federal government mandated the CBC and Radio-Canada to produce and distribute television programming to Canadian audiences. As the only broadcaster for most of the first decade of Canadian television, these two networks addressed audience demand for American television by balancing their schedules with such programming.

Beginning in the late 1950s, as private stations were granted licences and entered the Canadian broadcasting market, regulations were introduced which required both CBC and private broadcasters to exhibit a certain percentage of Canadian programming. In the case of the private sector, this meant that a certain portion of advertising revenue from U.S. programs could be reinvested to buy or create new Canadian programming.

But this is not the only reason why Canada's broadcasters offered foreign content in these early years. It was also the case that Canadian broadcasters — particularly between the 1950s and the 1980s — did not always have enough Canadian programming to fill their schedules and, as such, needed American programming to fill out their line-ups. With the licencing of many new private services the CBC and Radio-Canada gradually phased out most foreign content in order to reposition both networks as more distinctively Canadian services.

The original policy model was successful in encouraging the production of news and sports programming; it was much less successful, however, with other types of programming, particularly English-language drama. But as the CRTC authorized more services for cable carriage, thereby fragmenting audiences and advertising revenue, the original policy model came under even greater stress. Subscriber revenues were growing, but audiences were fragmenting, meaning that broadcasters' overall revenues were insufficient to produce quality drama that could compete in the English-language marketplace.

In anticipation of these challenges, the federal government issued a new Canadian broadcasting policy statement in 1983. The purpose of this policy was to address changes in broadcasting technologies and the need to adapt the Canadian broadcasting system to the changing marketplace. The policy had the following goals:

These goals, and the realization that the Canadian broadcasting system needed to be more competitive, were the underlying principles that guided the Broadcast Program Development Fund, a fund that was in operation from 1983 to 1996.

Broadcast Program Development Fund

The Broadcast Program Development Fund was part of the government's 1983 policy statement and was designed to encourage the production and broadcast of quality television programs created by private sector producers. There were two reasons for the Fund:

At the time of the Fund's launch, Canada did not have a viable independent production sector. Chapter 8 has more on the genesis of this sector but, in short, this was a period during which most independent production was being done in-house for the CBC, Radio-Canada and private broadcasters.

The Canadian Film Development Corporation (now Telefilm Canada) administered the Broadcast Program Development Fund. This fund provided independent producers with loans, loan guarantees and equity investment of up to one-third the costs of the production of feature films, drama, documentaries, variety and children's programming. The main criteria for access to the Fund included:

Overall, the Fund was worth some $35 million dollars, rising to $60 million by 1987, with 50% of the monies reserved for productions to be aired on CBC.

In parallel with the creation of the Broadcast Program Development Fund, the CBC announced in 1983 that it was increasing its prime-time Canadian content levels, from 70% to 80% over five years. At the same time, the CRTC issued a policy statement on Canadian content for television, which introduced the notion of using conditions of licence to ensure that television broadcasters would purchase or produce Canadian content for broadcast.

The Cable Production Fund

In 1993, the CRTC launched a review of the changing communications landscape in a process known as a "Structural Public Hearing" (Public Notice CRTC 1993-74). The purpose of this review was to ensure that the objectives of the Broadcasting Act could still be met in Canada's rapidly evolving broadcasting environment.

As part of its structural hearing, the CRTC examined the economics of Canadian broadcasting and the extent to which it was possible to live up to the objective in Section 3 of the Act, which states that the system should "encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity." The Commission found that Canadian television programming, whether produced in-house or independently, is far more expensive to acquire than foreign programming. This meant that even if a Canadian and foreign show drew the same advertising revenues and audience shares, the rate of return would always be smaller for the Canadian program, if not a net loss. For this reason, the Commission concluded that a financial incentive was essential if Canadian broadcasters were to acquire or produce Canadian drama, documentaries and children's shows. Accordingly in 1994, the Commission decided to amend the Cable Regulations to create the Cable Production Fund.

The main purpose of the Cable Production Fund was to assist in the creation and broadcast of high-quality Canadian programs in "under-represented" categories during peak viewing hours. The Fund was designed to provide a licence fee top-up to cover the difference between what was being offered by the broadcasters and what was needed by the producers to make their programs. The Cable Production Fund was short-lived, running from 1994 to 1996.

The Canadian Television and Cable Production Fund

On 9 September 1996, the Minister of Canadian Heritage announced the creation of the Canadian Television and Cable Production Fund (CTCPF). The CTCPF was a union of the Broadcast Program Development Fund, which had a $100 million budget at the time, and the Cable Production Fund. The justification for the creation of the CTCPF was that the Canadian production and broadcasting market was becoming increasingly competitive and, as such, there was a need to "ensure that we are able to maintain and increase the quantity and the quality of Canadian programming as we head into the multi-channel universe."¹

In 1998, the Canadian Television and Cable Production Fund was renamed the Canadian Television Fund (CTF). This fund represents a public/private partnership between four distinct groups: cable distributors, satellite distributors, the Department of Canadian Heritage and Telefilm Canada. The CTF will be described in detail in a subsequent section of this chapter.

As will be seen later on, a theme that animated much of the witness testimony that the Committee heard was grave concern with the consequences of the CRTC's 1999 television policy. To provide perspective on this debate, this section summarizes key elements of the Commission's new policy.

The CRTC's 1999 Television Policy

On 11 June 1999, the CRTC published the results of its Canadian television policy review. In Public Notice CRTC 1999-97, Building on Success — A Policy Framework for Canadian Television, the Commission established five tenets for its new television policy:

The regulatory changes to support these principles came into effect on 1 September 2000. The rationale for the five tenets is outlined in the next sections.

Priority Programming

The notion of "priority programming," which was introduced with the CRTC's 1999 television policy, was an expansion of, and replacement for, the expression "underrepresented programs," that the Commission used up to that point. The rationale for this change was explained as follows:

The expansion of this concept will form part of a more flexible policy framework. Given that U.S. drama dominates viewing of English-language drama, this flexibility will build on Canadian expertise and excellence in a wider variety of categories. The Commission considers that this will position Canadian programs competitively and enhance export potential.²

Furthermore:

These priority categories will also expand choice for Canadian viewers and afford increased opportunities to see themselves and express themselves in their regional context. In expanding these categories the Commission intends to encourage the production of regional programming. Such diversity should increase the synergies between conventional television and specialty services, attracting more viewers to individual Canadian programs through increased opportunities for exhibition.³

With this in mind, the Commission identified the following priority programming categories for Canadian programming:

On 23 December 1999, the CRTC issued its definitions for priority programs.⁴ For the drama and comedy category (known as Category 7), the following definition was provided: "Entertainment production of a fictional nature, including dramatization of real events. They must be comprised primarily of (i.e., more than 50%) dramatic performances." This category has the following subcategories:

Exhibition requirements

A major change triggered by the introduction of the CRTC's 1999 television policy was the abandonment of Canadian expenditure requirements as a condition of licence. This change was prompted by the Commission's conclusion that broadcasters would — by default — spend money on high-quality Canadian programming as long as they were still required to broadcast a certain number of hours of Canadian programming during peak viewing hours. As the Commission noted:

The Canadian broadcasting system has become increasingly competitive. In such an environment, licensees need flexibility and diversity to attract the largest possible audiences and advertising revenues. The Commission believes that, in a competitive environment, licensees require high-quality programming to win audience loyalty.⁵

As such:

The Commission is concerned that the existing expenditure requirements are complex and may not provide licensees with the flexibility they require to adapt their programming strategies to a highly competitive marketplace. In addition, concerns regarding the equitable application of expenditure requirements have begun to outweigh the benefits.⁶

Time Credits for Canadian Drama

Another element of the CRTC's new television policy was the introduction of 150% and 125% time credits for Canadian dramatic programming broadcast during prime time hours, to replace its existing 150% time credit system. According to the Commission, the amendments to the time credits were to recognize: "that drama is more expensive to create, produce and exhibit and competes with expensive foreign programs."⁷ Thus, beginning in September 2000, multi-station ownership groups became eligible for 150% time credits against their required hours of priority Canadian programming if they broadcast drama or comedy programs during the peak viewing period, provided the program:

To qualify, programs must receive 10 points on the 10-point scale used by the Canadian Audio-Visual Certification Office, which is located in the Department of Canadian Heritage.

As for the 125% credit, this is awarded for programming that meets the first three conditions listed above, but has less than 90% drama content.

Local and Regional Reflection

The principle of local and regional reflection was introduced in the CRTC's 1999 television policy in response to a perceived decline in the amount of local and regional news and non-news programming. Concerning local news programming, the Commission has this to say:

The Commission has carefully evaluated the availability, profitability and success of local news programs throughout the country. It has also considered the changing broadcasting environment and, in particular, the availability to Canadians of alternative sources of local news and information. In larger Canadian markets, viewers are able to choose among local or regional news provided by the CBC or Radio-Canada, and two to four private stations. In addition, some community cable channels provide regular local newscasts. A regional specialty service, Pulse 24, provides news and information primarily in southern Ontario. Various information services are also increasingly available on the Internet for those who need specific types of local information or who wish to discuss local issues.

The Commission believes that, in the new television environment, there are sufficient market incentives to ensure that audiences will continue to receive a variety of local news without regulatory requirements.⁹

For these reasons, the Commission was of the view that it was no longer necessary that conventional, local television stations make quantitative commitments with respect to local news programs. That said, they would still be expected to demonstrate how they would "meet the demands and reflect the particular concerns of their local audiences, whether through local news or other local programming."¹⁰

As for priority local and regional programming (i.e., non-news) the Commission was very concerned by its apparent decline since the late 1980s. It noted that:

There appear to be two major reasons for the reduction. First, as a result of the regulatory emphasis on expensive, peak time entertainment programs, the largest broadcasters have had fewer

resources to devote to local programs. Second, the consolidation of the ownership of local stations in the hands of a few corporate groups has encouraged management to effect operational efficiencies that have reduced resources at the local station level.¹¹

With this in mind, the Commission introduced the requirement that all broadcasters "demonstrate, at licencing, or in their licence renewal applications, how they propose to meet the demands and reflect the interests of their local audiences."¹²

Local and regional programming issues are discussed in Chapter 9.

Maintenance of the existing requirement levels for Canadian content

The fifth tenet of the CRTC's 1999 television policy was the preservation of the existing requirements for broadcasters for the delivery of Canadian programming. On this point, the Commission was quite clear that it saw no reason to change the existing content expectation, which requires that "not less than 60% of the broadcast year and not less than 50% of the 6 p.m. to midnight evening broadcast period ... be devoted to Canadian programs."¹³

The reasoning behind this expectation was explained by the Commission as follows:

The Act requires that each broadcaster make maximum use, and in no case less than predominant use, of Canadian creative and other resources in the creation and presentation of programming. Canadian content regulations have been a primary tool in fulfilling that objective.

The Commission notes that daytime television can provide important additional opportunities for broadcasters to reflect the particular needs and concerns of the communities they serve. The Commission, therefore, does not consider that changes to the existing regulatory requirement for Canadian content with regard to the percentages to be achieved are necessary.¹⁴

As noted above, witnesses identified certain aspects of the CRTC's new television policy as a root cause for some of the challenges that the Canadian broadcasting system faces today. In particular, some witnesses were of the view that distinctively Canadian drama and comedy has been disappearing from Canadian screens given the greater flexibility that the CRTC's 1999 policy grants Canadian broadcasters. As will be seen in a subsequent section, the Committee is very troubled by what it heard and agrees that action must be taken to address these concerns about the CRTC's 1999 television policy. For now, this discussion provides a short profile of how notions of Canadian content have changed over time.

The previous sections provided background on how Canada's television policy for the production and exhibition of Canadian programming has evolved over the past 50 years. In parallel with this evolution in Canadian television policy has been a gradual refinement of the concept of "Canadian content" for television programming. This section briefly summarizes the extent to which notions of Canadian content have changed over time. The importance of this discussion should not be underestimated. Indeed, as will be seen later on, a thread that runs through most of the witness testimony on this subject was that existing notions of Canadian content have become so convoluted and contradictory that, to a certain degree, efforts to produce distinctive Canadian programming are now being undermined by the very system that was designed to encourage and support such creative efforts.

The Early Years

Although Canada's first study of broadcasting, the Aird Commission of 1928-29, was concerned with the need for a national radio network, its motivation, as explained in Chapter 2, was the lack of Canadian programming.¹⁵ Thus, to the extent that we understand modern conceptions of culture, it is reasonable to say that Canada's broadcasting policy for radio was this nation's first cultural policy.¹⁶

Since that time, Canadian content requirements have evolved considerably, particularly as they relate to television programming. At first, the main, unarticulated goal for television was to broaden the range of programs available to Canadians. Later, as the size of our broadcasting system increased from one public broadcaster and a few hours of programming each day, to several private sector broadcasters and many more hours of programming, the regulations evolved.

In November 1959, the Board of Broadcast Governors introduced quotas for television to ensure a broadcasting system that was "basically Canadian in content and character." The stated goal of these regulations was to assist in "maintaining Canadian identity and strengthening Canadian unity."¹⁷

"Canadian content" in these early years was based on the participation of Canadian writers, producers, directors, performers and technicians. The regulations did not include set ratios or a point system, but it was assumed that at least two-thirds of the main participants would be Canadian.¹⁸

Defining "Canadian character," however, was decidedly more difficult. Programs considered "basically Canadian in content and character" included: programs produced by Canadians; programs produced in Commonwealth or French-speaking countries; news broadcasts and commentaries; broadcasts of foreign events which included Canadian participants; broadcasts of foreign events of "general interest" to Canadians; and Canadian-produced films or reproductions.¹⁹

The regulations also stipulated that during any four-week period, at least 55% of a network or station's broadcast time should be devoted to Canadian programming. The content requirements were phased in gradually, beginning with a minimum requirement of 45% Canadian programming before 1 April 1961, and 55% before 1 April 1962. Many stations found it difficult to achieve the 55% requirement; consequently, in June 1962, the regulation was amended to reduce the Canadian content requirement to 45% during the summer months. This amendment was maintained during the summers of 1963 and 1964. In 1965, the 55% minimum requirement was reinstated. Subsequent amendments to the regulations stipulated a minimum Canadian content requirement of 40% between 6 p.m. and midnight, as well as an adjustment to the measurement period, from four weeks to calendar quarters of three months each.

Not surprisingly, there were critics of these regulations who argued that they did little to promote the quality of Canadian broadcasting. According to one account of this period:

It seemed impossible to identify the peculiar characteristics of the Canadian culture and, in practice, it was unnecessary to attempt to do so. If Canadians had substantial opportunity to participate in broadcasting, their participation would tend to reflect the Canadian character and to maintain the Canadian identity.²⁰

That said, despite their controversial nature, these early regulations set the stage for all subsequent efforts to regulate Canadian television content. As Paul Rutherford explains:

By the mid-1960s, [a] 'new nationalism' had captured the fancy of assorted writers and academics. ... What was necessary to slay the American dragon, so it seemed, was a vigorous policy of Canadianization to patriate the communications industry.²¹

Canadian Content Today

There are several methods now used by federal support programs and related agencies to measure the extent to which programming is "Canadian." The Canadian Audio-Visual Certification Office (CAVCO), which is housed at the Department of Canadian Heritage, uses what is known in the industry as the CAVCO scale. This scale is used by program producers to obtain a tax credit and is required by the Canadian Television Fund and Telefilm Canada to determine funding eligibility.

Figure 5.1 shows how the scale awards points. Based on this scale, if a proposed production receives 6 out of 10 possible points, it is granted a Canadian Film or Video Production Certificate and becomes eligible for a Canadian Film or Video Tax Credit.

The CRTC also uses the CAVCO scale and additional criteria to identify Canadian programs and — by extension — to determine whether broadcasters have devoted a minimum percentage of airtime to "Canadian content." Figure 5.2 shows the CRTC's Canadian content requirements for various types of broadcasters.

But the existing Canadian content point system is far more complex than the above paragraphs might suggest. Along with the 10 CAVCO points used by the Canadian Television Fund are a set of contradictory definitions, additional criteria and points scattered throughout the federal support system, not to mention several others used by the various provincial and territorial support systems. In 2002, for example, the CTF used "visible element" criteria to determine the eligibility of shows for a licence fee top-up. Figure 5.3 shows the CTF's 2002 criteria for the variety and performing arts category.

In short, the existing Canadian content system for the certification, funding and production of Canadian programming can best be characterized as a highly complex and interdependent set of subjective and objective measures that are used by various agencies within the Canadian broadcasting system to determine the extent to which a Canadian television production is, or is not Canadian, and should, or should not be funded. As will be seen later on, this system was a sore point for many witnesses. For now, this chapter turns to a consideration of the various direct and indirect funding sources that exist to help Canadians make Canadian television programs.

Since the beginning of private broadcasting in Canada, the regulatory framework has required Canada's private broadcasters to contribute to the development of Canadian programming. To do this, private broadcasters have used revenues generated from profitable foreign shows to produce or purchase less profitable Canadian programs.

Figure 5.4 shows estimated broadcaster costs, revenues and profits for the broadcast of a one-hour drama on Canadian television. As can be seen, even after subsidies and advertising revenues are taken into consideration, an English-language Canadian broadcaster averages a net loss of about $125,000 for each hour of Canadian drama, and a net profit of about $275,000 for each hour of American-made drama. In the French-language market, however, modest profits are possible with Canadian-made drama, given that these programs are popular and can be made at a lower cost.

Witnesses told the Committee, however, there is now some concern that the cross-subsidy model is under pressure. This subject will be returned to in Chapter 8. For now, it is worth noting the main reasons for this. The first is that the price of American shows could rise. This was suggested by Mr. Alain Gourd, Executive Vice-President with Bell Globemedia:

Broadcasters have relied for many years on popular American programming to cross-subsidize this kind of Canadian content. However, today American programs are becoming more expensive, and the traditional model is breaking down. We have a game plan for success in Canadian programming. At CTV, we are using the foundation provided by the Canadian Television Policy to focus our efforts on finding ways to create more popular, more successful Canadian programming.²²

An indication that this may be true comes from the program expenditure data of private broadcasters in Canada. As will be seen in Chapter 8, Canadian broadcasters expenditures on foreign programming have increased significantly in recent years at least in part because of changes in the value of the Canadian dollar.

A second reason is that the producers of U.S. television programs may decide to refuse to sell certain shows to Canadian broadcasters. For example, if a U.S. broadcaster knows that it can increase advertising rates and benefit from spillover viewing in Canada, it might instead sell the rights for the United States and Canada to an American network.²³

A third possibility is that producers may, in the near future, find ways to sell their shows directly to individual viewers, thus circumventing broadcasters, both U.S. and Canadian. This point, which was discussed in Chapter 4, may well come about as it becomes easier to acquire programming on demand, for example, via the Internet.

In short, given the cost of developing an hour of high-quality Canadian television, it can be seen why very little would be produced without support from the Canadian taxpayer. As numerous witnesses explained, the Canadian market is simply too small to support reasonable amounts of high-quality programming, particularly English-language Canadian drama. For this reason, Canada's federal and provincial governments, taken together, help cover much of the Canadian programming that reaches our screens. Indeed, if we take the example of English-language Canadian drama, at least 50% of all costs — in the form of payments from the Canadian Television Fund (CTF) and tax credits, both federal and provincial — are covered directly or indirectly by Canadian taxpayers. Foreign sales and private television funds make up most of the rest of the funding.

Some sense of the way production costs are divided can be seen in figure 5.5, which shows the overall funding to Canadian drama and comedy productions by the Canadian Television Fund. As can be seen, in 2001-02, the Canadian Television Fund contributed nearly $112 million (37%) of all funding to the total production budgets of all drama and comedy productions that received such support. Moreover, the CBC/SRC contributed almost $40 million (13.5%), the federal government added another $23 million (7.6%) and provincial governments accounted for a further $35 million (11.5%). Given that about 60% of the CTF's budget is public money, this means that for productions supported by the CTF, Canadian citizens contributed more than 50% (about $150 million) of the funds required to produce distinctively Canadian drama and comedy in 2001-02. In other words, if an hour of CTF-supported Canadian drama cost $1 million, taxpayers contributed at least $500,000 for the creation of that hour.

With the above economic considerations a backdrop to this discussion, the next sections profile the main direct and indirect funding sources for Canadian program production. These include: The Canadian Television Fund, Telefilm Canada, the National Film Board, tax credits, provincial and territorial support and private program funds.

The Canadian Television Fund

As noted earlier, the Canadian Television Fund (CTF) is a public/private partnership with an annual budget of about $250 million. Funded programs have included: This Hour has 22 Minutes, Cold Squad, Un gars, une fille, and Histoires de Filles. The Government of Canada, cable companies and direct-to-home satellite service providers support the Fund. It is an independent, non-profit corporation, governed by a Board of Directors comprised of representatives from the television, cable, production, film and video distribution industries, as well as representatives from the Department of Canadian Heritage and Telefilm Canada.

The CTF's mandate is:

Figure 5.6 shows the breakdown in funding sources for the CTF in
2001-02. As can be seen, the federal government was the single biggest contributor to the fund in 2001-02, contributing $100 million via the Department of Canadian Heritage and $45 via Telefilm Canada. It is important to emphasize, however, that the total budget for productions financed directly and indirectly through the Fund in 2001-02 was $802.2 million (see figure 5.8).

That said, the Committee notes that in February 2003, the federal government renewed its support to the CTF for another two years, with an allocation worth $150 million. In other words, the value of the Government of Canada's involvement in the CTF will be $75 million in each of the next two fiscal years, which is $25 million less than in previous years.

The Committee condemns the federal government's decision to reduce its contribution to the Canadian Television Fund and urges the government to reverse this decision.

Indeed, as this report will show, the Canadian broadcasting system is a highly complex and interdependent system. As such, the withdrawal of $25 million represents losses far greater for the Canadian broadcasting and production industries as a whole. For example, with less funding, it is certain that some productions — including some planned by the CBC and Radio-Canada — will not receive funding. Furthermore, without CTF support, some productions will be cancelled, thereby denying jobs to Canadians, not to mention the loss of original and distinctive Canadian programming that would otherwise have been created.

Further evidence of the impact of the Canadian Television Fund on the Canadian broadcasting industry can be seen in figure 5.7. This figure shows that the Canadian Television Fund has contributed significantly to the creation of Canadian programming since 1997-98. For example, in the drama/comedy category, the creation of at least 600 new hours of Canadian drama was supported in each of the past four years. Equally impressive has been the steady rise in the production of documentary programming, from 517 hours in 1997-98 to more than 1,120 hours in 2001-02. Similarly, total support has increased steadily, from about 1,900 new hours in 1997-98 to more than 2,800 new hours of programming in 2001-02.

Figure 5.8 shows the total value of projects supported by the CTF and participating broadcasters between 1997 and 2002. This figure reveals a relatively steady rise in CTF and broadcaster support during this period, with total supported projects increasing from 347 in 1997-98 to 583 in 2001-02. It also shows a gradual (albeit unsteady) rise in the total value of CTF contributions, with total contributions increasing from $177.6 million in 1997-98 to $241.4 million in 2001-02. As for the overall value of projects supported by the CTF, it can be seen that there were some fluctuations, with total productions budgets ranging between $600 and $800 million.

Applicants apply for funding through one of the Fund's two separate programs: the Licence Fee Program or the Equity Investment Program, the latter of which is administered by Telefilm Canada. These two programs are described below.

The Licence Fee Program

The Licence Fee Program (LFP) contributes to the production of Canadian television and feature films in the form of a non-recoupable top-up to the licence fee that broadcasters must pay to acquire programming. To receive LFP funding support, a project must be licenced by a Canadian broadcaster, whether conventional, educational or pay and specialty. Typical LFP contributions range from 15% to 35% of total production costs. In 2001-02, the LFP contributed $138 million, that is, 17% of the total production budgets of projects supported. As for broadcasters, they committed more than 30%, or $230 million, towards the production of CTF funded productions. Figure 5.9 shows the total contribution of Canadian broadcasters to broadcast licence fees in 2001-02.

The Equity Investment Program

The Equity Investment Program (EIP) can contribute up to 49% of a project's allowable costs for the production of Canadian television programs and feature films through a direct cash investment. The intent of the EIP is to recoup on investment. In many instances, however, there is no recoupment, making the EIP investment, for all intents and purposes, a grant. The EIP also contributes to the development of television programs and feature films through the provision of advances. In 2001-02, the CTF provided development financing worth $4.5 million to 252 projects. Telefilm Canada administers the EIP envelope on behalf of the Canadian Television Fund.

Telefilm Canada

Telefilm Canada is a federal cultural agency dedicated to the development and promotion of the Canadian film, television, new media and music industries. Telefilm reports to the Department of Canadian Heritage.

Telefilm's mission is to provide financial and strategic assistance to the industry in the production of high-quality works (e.g. feature films, drama series, documentaries, children's programming, variety shows and new media products) that reflect Canadian society, including its linguistic duality and cultural diversity. Telefilm Canada's current annual budget is approximately $230 million, of which $45 million was contributed to the CTF in 2001-02.

Telefilm's initiatives aim to ensure the widest possible audience for Canadian works, both in Canada and abroad, through support for distribution, export, versioning, marketing and industry promotion at Canadian and foreign festivals, markets and other events. Telefilm Canada maintains four offices in Canada (in Montréal, Toronto, Vancouver and Halifax), along with a European office, located in Paris.

The National Film Board

Created in 1939, the National Film Board of Canada (NFB) is a public agency that produces and distributes films and other audiovisual works, which reflect Canada to Canadians and the rest of the world. Since its beginnings it has played an important role in Canadian and international filmmaking. Its founder and the first Government Film Commissioner, John Grierson, wanted to make the NFB the "eyes of Canada" and to ensure that it would "through a national use of cinema, see Canada and see it whole: its people and its purpose."²⁴

With an annual parliamentary appropriation worth $60.6 million, the National Film Board is a unique centre for the creation of audiovisual materials. Its mandate remains to produce and distribute films and other audiovisual works intended for Canadian audiences and foreign markets, in order to increase viewers' knowledge and understanding of the social and cultural realities of Canada.

NFB films are produced in both official languages through its English and French programs, by in-house and independent filmmakers across the country. The NFB maintains production facilities in Vancouver, Edmonton, Winnipeg, Toronto, Ottawa, Montréal, Quebec City, Moncton and Halifax.

The NFB has established a distribution network with partners in the public sector (public and school libraries) and private sector (distributors, cataloguers, movie theatre chains, video retail outlets, etc.) to provide access to its films and videos, thus ensuring the NFB's presence in all provinces and territories. NFB productions are often aired by conventional and specialty broadcasters, and Canadians can purchase NFB videos by calling its toll-free number, or from its virtual catalogue on the NFB Web site. Internationally, the NFB has offices in London, Paris and New York.

In short, the National Film Board is an integrated production and distribution organization with an extensive film collection, a conservation laboratory, and post-production and research and development facilities located at its operational headquarters in Montréal. Its Government Relations service operates from Ottawa, while its Communications and Distribution Services, Human Resources and Administration branches are principally located in Montréal.

Tax Credits

Tax credits represent an indirect way whereby Canadian television production is supported. The Canadian Audio-Visual Certification Office (CAVCO) co-administers the Canadian Film or Video Production Tax Credit (CPTC) and the Film or Video Production Services Tax Credit (PSTC) with the Canada Customs and Revenue Agency (CCRA).

The objective of the Canadian Film or Video Production Tax Credit is to encourage Canadian programming and to develop an active domestic production sector. This fully refundable credit can be up to 12% of the total cost, net of assistance, of an eligible production. Under the CPTC program, CAVCO performs two distinct functions: (1) Canadian content recognition, and (2) estimation of the eligible expenses of production. For a production to qualify as Canadian content for tax credit purposes through CAVCO, it must meet specific criteria for key creative personnel and project costs. The CPTC is available at a rate of 25% of eligible salaries and wages incurred after 1994. Eligible salaries and wages qualifying for the tax credit may not exceed 48% of the cost of the production, net of assistance, as certified by the Minister of Canadian Heritage. Therefore, the tax credit could provide assistance of up to 12% of the cost of production, net of assistance.

The Film or Video Production Services Tax Credit (PSTC) is designed to enhance Canada as a location of choice for film and video productions employing talented Canadians, strengthen the industry and secure investment. The PSTC is available at a rate of 11% of qualified Canadian labour expenditures.

Provincial Support

Provincial support is largely delivered through direct support and tax credits. There are 10 provincial and 2 territorial agencies that are major contributors to the Canadian film, television and new media industries.²⁵ In total, these agencies contributed between $213.1 million and $272.8 million annually from 1999 to 2002 to Canada's film, television and new media industries. This includes contributions of between $39.6 million and $43.8 million in direct funding support with a wide range of financing instruments such as development support, production financing ranging from equity financing to grants, marketing support, professional development assistance, festival funding and organizational or company development funding.

Tax credits are a core component for many provincial agencies, with total per annum contributions of between $173.5 million and $230.9 million between 1999 and 2002. Provincial and territorial agencies target their support in markedly different ways across the country. Some provinces such as British Columbia, Saskatchewan, Manitoba, Nova Scotia, PEI, New Brunswick, Quebec and Newfoundland offer both direct funding and tax instruments; some, like Ontario, have opted for a more heavily weighted tax credit system; others, like Alberta, the Yukon and the North West Territories do not have a tax credit system but rely entirely on direct funding support. Details of the various provincial and territorial support programs are provided in Appendix 9.

Private Sector Support

Apart from the Canadian Television Fund, which receives about $150 million annually in private sector support from cable and satellite companies, are several smaller, private sector funds. Appendix 9 lists and describes many of these funds.

The preceding sections have provided some sense of the complexity of the environment witnesses were talking about when they addressed the Committee. This section reviews what the Committee heard. To begin, it makes a few observations on some of the core differences between the English and French-language broadcasting markets in Canada. Thereafter, a short summary of what witnesses told the Committee about the state of Canadian television programming is provided.

The English and French Television Markets

Some detail on the evolution of French and English-language programming was provided in Chapter 4, in the introduction to this chapter and will again be raised in Chapter 8. While a simple description of the different types of programming produced is useful, these differences do not capture some of the fundamental differences between these two markets. For a variety of reasons, Canada's French-language market has been much more successful in the creation of programming that attracts large audiences than the English-language market. The principal reasons have to do with the fact that French-language creators, in the main, are not in direct competition with French-language productions from France, or English-language productions from Canada or the United States. Other reasons can be attributed to some combination of creativity, ingenuity, the development of an indigenous star system and government support. Thus, while it is rare in English Canada to have an audience of even 10% for a Canadian drama, it is quite common in Canada's French-language markets to have audience shares of 20%, 30% or higher for Canadian productions.

It is also important to remember that the success of French-language Canadian programming does not rest on a few exceptional miniseries, but is a phenomenon that applies to a long list of ongoing series such as Fortier, miniseries such as Omerta, talk shows such as Deux filles le matin, children's programming such as Watatatow, téléromans such as Virginie, and comedies such as La Petite Vie and Un gars, une fille.

To some extent, the challenges faced by Canada's English-language programs producers are entirely different from those faced by their French-language counterparts. English-language television programs have always had to compete with programs originating from the United States, a country with a well-established television and film industry that produces programming that is attractive not just to English-language Canadians, but to audiences around the world. This challenge was noted by the Royal Commission on Broadcasting in 1957 when it observed:

The problem of the influence on Canada from the United States is not mainly that American television programmes are too bad, but many of them are, in a special sense, too good. ... The great artistic wealth of the United States is able to produce programmes of great variety and interest. Their material wealth enables them to command the services of good writers and performers, and the best technical skills in programme production.²⁶

This capacity to attract the best talent means that it has always been very easy for the most capable English-language Canadians — whether writers, producers or actors — to migrate south and work in the United States. The list of talented Canadians who have worked in the United States is a veritable who's who, and includes such notables as Dan Aykroyd, Pamela Anderson, Raymond Burr, Neve Campbell, James Cameron, John Candy, Jim Carey, Sarah Chalk, John Colicos, James Doohan, David James Elliot, Dave Foley, Michael J. Fox, Tom Green, Graham Greene, Lorne Greene, Paul Gross, Phil Hartman, Jillian Hennessy, Michael Ironside, Norman Jewison, Rich Little, Norm MacDonald, Raymond Massey, Lorne Michaels, Colin Mochrie, Rick Moranis, Carrie-Anne Moss, Mike Myers, Kate Nelligan, Leslie Nielson, Catherine O'Hara, Matthew Perry, Mary Pickford, Christopher Plummer, Jason Priestley, William Shatner, Martin Short, Jessica Steen, Donald Sutherland, Dave Thomas and Scott Thompson.

An added factor is the advantages offered by the size of American market. In simple terms, the American television market is large enough that it can support, without subsidies, a large film and television industry where a few successes can easily cover the costs of the many films and television series that are not successful.

This reality was reflected in the testimony of Mr. Richard Stursberg when he told the Committee:

... the most beautiful programs in the United States, programs like The West Wing or ER, they cost approximately $2.2 million to make per hour. ... The reason the Americans, of course, can spend this amount of money is that they have a base of citizens, a population,

that is dramatically larger than the base of English Canadians, so they can lay those costs off over a vast base. ...

Canadian programs typically return for an hour of drama between $65,000 and $90,000 an hour, and because they're distinctive, they get very little sale abroad. If that's all the money you could raise, there's no possible way you could make programming that would compete in quality with $2.2M an hour. That's the reason it is subsidized. We subsidize it up to a maximum of $1 million an hour, and private broadcasters pay more than they make on English Canadian programming. But it's very clear that if we did not do this, there would not be ... English Canadian drama and other programming ... because of the economics of the situation.²⁹

And there are at least two other factors that hurt English Canadian producers. First, while the average American prime time drama costs about $2 million³⁰ certain shows — such as a pilot episode — cost much more. As Ms. Loren Mawhinney, Vice-President, Canadian Production, Global Television Network, explained to the Committee:

... the production budget for the last season of Traders, all 13 episodes, cost less than the production budget for the hour-long pilot of [The] West Wing, made during the same year. The entire season of Traders cost $12 million while the one-hour pilot [for The West Wing] cost approximately $14 million.³¹

Speaking to this same point Mr. Alain Gourd, Group Executive Vice-President, Corporate, Bell Globemedia Inc., noted:

... in terms of production value, a program such as Cold Squad gives us a production value of close to $1 million, while the total investment in a production of [The] West Wing, which varies with each episode, may be from $3 million to $5 million.³²

Furthermore, because the full cost of shows such as The West Wing are easily recaptured within the American market, additional revenue made through sales to foreign markets, and video or DVD sales is pure profit, meaning that American networks can sell their programming to Canadian networks at very low cost. As Mr. R.H. Thomson, Actor, Writer and Broadcaster, Alliance of Canadian Cinema, Television and Radio Artists, explained to the Committee:

The American producers sell below cost in our market. We can't sell below cost in our own market, so we're being culturally dumped on. To maintain a space in the economic environment, in which we actually can produce Canadian programs that are watched, we need structural adjustments ...³³

The Goals of the Funding System

The Committee heard a great deal about how the cultural goals of the current Canadian content system are conceptualized and measured. Mr. Richard Stursberg, who was at the time the President and CEO of the Canadian Television Fund provided a short primer for the Committee on how the funding support system for Canadian television programming works:

The way people define Canadian television has historically been on the basis of a points system. This is the way the CRTC does it, and this is the way CAVCO ... does it for the purpose of certifying programs for tax credits. ... At the fund to qualify for funding, you must get all 10 points, and moreover, you must hit the other three so-called essential requirements. ...

First, the project must speak to Canadians about Canadian themes and subjects. Second, it must be shot and primarily set in Canada. And third, the underlying rights are significantly and meaningfully developed by Canadians. ...

Industrial Canadian programming is extremely important. It is the programming that in fact, as I say, constitutes two thirds of the total, and is fundamental for keeping actors, writers, cameramen, directors employed and the whole infrastructure of the system working. But the other one-third, the distinctively Canadian, is the programming that is culturally important, in the sense that this is the programming made by and about Canadians for Canadians.³⁵

While this might sound straightforward, many witnesses told the Committee that the funding system for Canadian programming has become an exceptionally complicated and bewildering experience. As witnesses explained, the various point systems have, over time, been adjusted, expanded and adumbrated by the various organizations responsible for dispensing funds. The system has been further complicated because a project will not receive support unless it has received prior approval from a broadcaster. That is, a broadcaster has to indicate that it will broadcast the proposed program or series. In the language of the industry, project funding is "triggered," as in: "If you get a licence, you ... trigger the threshold for the CTF."³⁶

Further insights into the complexity of the system can be seen in witness testimony. For example, Mr. Richard Zurawski, President of East West Media in Halifax, told the Committee that even if a producer meets the required Licence Fee Program (LFP) threshold for the CTF, this does not guarantee that Telefilm will agree to provide equity investment (EIP) support. And if the EIP portion is denied, a production will lose its LFP grant unless new funding can be found in short order. He explained:

The CTF covers the Telefilm envelope. The Telefilm is the equity investment and CTF covers equity and licence. The first round is usually for the licence fee. On this particular round we received 59 out of 59 points. We received the maximum allotted from the CTF, yet we did not qualify [for Telefilm funding] ... even though I exceeded the maximum threshold of the broadcaster input — we had APTN as the major broadcaster and we had 23.02% of our financing coming from the broadcaster, which allowed us an excess — we were told we didn't have enough broadcaster support.³⁷

Those witnesses interested in making co-productions with international partners voiced similar frustration with the way the CTF and Telefilm manage the funds. As Mr. Michael Snook, Board Member, Saskatchewan Motion Picture Association, told the Committee:

When the rules were first published, they were very clear and very simple, and they caused me to immediately pick up the phone and call the Canadian Television Fund's office in Toronto and say, I have pending an international documentary, an international treaty co-production, that must travel to seven countries in the world in order to cover its content. One of those countries is Canada, but only about one-tenth of the content can be shot here, because of the subject matter. Under your rules it appears that I will not get the points for Canadian content for shooting in Canada, in fact, I will lose half of the Canadian content points available to me. I'm sure that there were many such calls when those rules first came out. There has been some movement on the part of the Canadian Television Fund to acknowledge the difficulty documentary filmmakers face in making their projects both intellectually accurate and internationally marketable. It is that approach that I would urge be applied to all genres.³⁸

 
Other witnesses pointed to a perverse irony of treaty co-productions (see Chapter 8 for more on co-productions). As Ms. Gretha Rose, President, Cellar Door Productions explained:

... to get federal money through the CTF, we have to certify as international coproductions. That allows the broadcaster's licence fee to go against the Canadian portion of the budget only, so it gives us higher points. The higher your points, the more likely you're going to get money from CTF. It's all based on a 59-point structure. So the more work done overseas, the higher your points are and the more likely you are to get Canadian money.³⁹

This point was confirmed by Mr. Robert Soucy, Director of the Canadian Audio-Visual Certification Office, who noted "that official treaty co-productions ... are considered Canadian content as well, but they are not necessarily point-bearing."⁴⁰ In other words, because Canadian co-productions automatically qualify as Canadian content, many Canadian creators have no choice but to find investors in other countries in order to make their programs, simply because their ideas for a television program do not meet domestic Canadian content criteria.

Speaking to this same point, Mr. François Macerola, who was at the time the Chairman of the Board of Telefilm Canada told the Committee that:

Since there is such enormous demand, the Canadian Television Fund has used Canadian content to prioritize projects. At the end of the day, the higher the Canadian content, the higher the score. Some producers responded in a somewhat ... Well, I prefer not to say exactly how they responded. They put in Canadian flags and a beaver, rather than ... a lion.⁴¹

The temptation to add beavers rather than lions to a program was described by more than one witness as leading to unfortunate consequences. For example, Mr. Mark Laing, Chairperson, Directors Guild of Canada told the Committee that "one of the encumbrances that could be removed is the subjective criterion in CanCon regulations, the maple syrup factor. We don't need it."⁴²

In short, Canada's creators were clear on several points. They are dealing with a funding system akin to a house of cards, where one funding source that has been awarded can be lost if another source is denied. They are dealing with a set of contradictory definitions that do not necessarily allow creators to create. The are dealing with a mountain of paperwork

that requires knowing years in advance who will work on a project. But even this does not scratch the surface of the system's complexity. Witnesses told the Committee that producers sometimes have to line up multiple sources of broadcaster support; they have to harmonize the objectives of the various funds; and, not surprisingly, pay expensive lawyer fees to handle the paperwork.

All of the above complexity is exacerbated by an added consideration — the industrial objectives of Canada's television production support system. Indeed, it is important to remember that the regulations, rules and support mechanisms described in this chapter are designed to support two goals: a cultural goal (to produce Canadian programs) and an industrial goal (to support the development of an industry capable of producing Canadian programs). The juxtaposition of these two goals becomes part of what Mr. Michael Snook termed a "home grown debate." He explained that there is:

... the notion that this industry is either intensely cultural or intensely industrial, and ne'er the twain shall meet. In fact, the reality is that film and television programming is made by large collaborative groups of people who work in teams — it is an industry. You cannot make a movie sitting in a garret with a pen and a pencil. You particularly cannot participate in today's technological world of the Internet, the web, high-definition television, direct-to-home television satellite distribution without being highly technical, including at the level of content producers, which is what our members are; they make content. Without a sense that our industry is both cultural and industrial at the same time, it's difficult to make clear policy that nurtures the industry on a national or provincial level. If we are told, as makers of content, that our mandate and the mandate of those who would support our development is purely cultural, we run into problems on the business side.⁴³

Mr. Richard Stursberg also acknowledged the importance of the industry and noted the importance of making sure that the rules created by the CRTC and the CTF (and by implication other government departments and agencies) are workable:

It is a fundamental question how we make sure we get these two things in sync. I don't want you to misunderstand me on this. I think industrial Canadian programming is extremely important, it has to be done. Distinctively Canadian programming is also extremely important, but the trick is to try to make sure the fit we get between what the [CRTC] makes by way of rules and the rules that are made at the [F]und makes sense for the system as a whole in both cultural and industrial terms.⁴⁴

But the fulfillment of the two goals, whether cultural or industrial, does not always recognize that that the work of Canada's creators must be carried out in a business-like manner. Indeed, witneses told the Committee that, apart from Telefilm's efforts to recoup its equity investment (EIP), there is no explicit provision in any funding mechanism to encourage the development of viable companies. On the contrary, support is project-based and not assessed against the business plan for the company. As Ms. Sonya Jampolsky told the Committee:

The problem is that none of the organizations are going to give you enough money up front to start paying those bills that are already mounting. Those bills are from the lawyers who have had to review all the contracts that start from the moment of development, from the people who are doing the research, from the people who are filling in the proposals. And so you run into a cash flow problem.⁴⁵

Nor, for example, is there a concerted effort by any agency within the system to market the resulting product. Not even the CRTC, observed Ms. Gretha Rose, requires or expects the promotion of the very programs the system subsidizes. Moreover:

If some of the [existing] regulations ... that make it impossible for a network to be involved in ... a commercially viable property, one that could be sold into the international marketplace ... were different ..., then would this even be an issue? You can't address one without addressing all the rest of it.

So do I think regulating ratings is the answer? No. But I don't think Heritage Canada coming up with a funding system that's weighted heavily on ratings is the answer inside of this present context either. It's a morass.⁴⁶

When one combines the lack of precision in the goals of the funds with the fact that little or no attention is being paid to the realities of running a business, it can be seen why so many witnesses referred to the Canadian television programming support system as "a mess."

All this being said, there were many others witnesses who highlighted the many success stories of the Canadian programming support system. The Committee was told, for example, that certain Canadian programs travel very well, particularly documentaries and children's shows. At least two companies that the Committee visited, Nelvana and PixCom, have been very successful in this regard, selling animated children's shows such as Franklin the Turtle and Freddy to markets outside Canada.

Moreover, as Mr. Michael Snook told the Committee:

There is no film or television production company in the world, particularly in Canada, that can exist without marketing its intellectual property around the world. Without that, we simply cannot survive economically.⁴⁷

This is why certain categories of Canadian programming, particularly children's, drama and documentaries require different levels of subsidy and why others, such as sports and news require very little, if any. Mr. David Keeble in one of the background papers prepared for the Committee made this point when he noted that:

... there are parts of the Canadian broadcasting system that are doing well with the current policies, and will continue to do so. Canadian sports, national news, and French entertainment programming will probably continue to succeed with current levels of subsidy, and do not really require exhibition regulation anyway. Since they are popular forms, broadcasters would probably schedule them without any requirement that they do so.⁴⁸

Canadian Content Exhibition Requirements

Another point raised by witnesses is the apparent decline in the availability of distinctively Canadian, English-language dramatic programming. These witnesses were of the view that the CRTC's 1999 television policy has granted Canadian broadcasters so much latitude that Canadian dramatic programming, in particular, is now much harder to find in prime time. Ms. Maureen Parker, Executive Director, Writers Guild of Canada, is representative of those witnesses who spoke on this point:

In the past three years, the Writers Guild has seen production of identifiably Canadian hour-long drama series fall from a high of 11 series in 1999 to just five series a year for each of the past three years. During this time, production of half-hour dramas has remained flat.

Long-form documentary has experienced similar pressures. It is increasingly difficult to get point-of-view documentaries — a genre that Canadians pioneered and at which we excel — produced and broadcast.

As dozens of new specialty channels have been introduced and as audiences have fragmented, broadcasters are increasingly resorting to low-budget, magazine-style documentary series for content. A number of factors have contributed to this decline in our dramas and POV documentaries. One important factor was the CRTC's 1999 television policy. While the CRTC's new policy set a prime-time quota of Canadian priority programming of eight hours a week, it expanded its definition of priority programming to include much cheaper genres of programming, such as regional programs and entertainment magazine shows.

The CRTC's new policy failed to set expenditure requirements for conventional broadcasters. This naturally made it attractive to meet Canadian programming requirements by opting for the cheapest form of programming possible. So we've now entered the era of Popstars, and No Boundaries, which is a reality-based series whose primary function seems to be to sell or market Ford SUVs.⁴⁹

Other witnesses, however, spoke in defence of the CRTC's new policy. Mr. Alain Gourd, Executive Vice-President with Bell Globemedia, noted that:

[CTV's] strategy is to focus on the success of blockbusters. CTV's approach to priority programming is to invest major resources in drama and documentaries. These are the two genres we're focusing on. CTV uses a simple premise: the more arrows we shoot at this target, the better our aim becomes and the more bull's eyes we hit. The Canadian television policy gives us this opportunity to focus on these genres and is producing impressive early results....

So we not only attracted strong audiences for these productions, whether it's the Jonathan Wamback [S]tory or the Matthew Shepherd [S]tory; we also scheduled them across nearly every day of the week in prime time.⁵⁰

To sum up, most witnesses were concerned about the following issues: the confusion between the cultural and industrial funding goals, the bewildering and contradictory nature of Canadian content definitions and the overwhelming bureaucracy that must be negotiated to secure funding support. Finally, witnesses expressed concern with the impact of CRTC's 1999 television policy on the exhibition of Canadian programming.

With the above considerations in mind, the next section makes a series of recommendations that the Committee believes will help bring clarity to and remedy the excessively complicated funding support system for the production of Canadian content television programming.

Witnesses who talked to the Committee about Canadian programming raised a number of points that require consideration. These include: the confused state of the current policies, the point system, the complexity of the funding process, the management and governance of the funds, and the appropriateness of the CRTC's 1999 television policy on priority programming.

Programming Policy

It is clear from the preceding discussion that the current system is more a result of evolution than design. As pointed out in the first section of this chapter, the initial emphasis on direct funding of a public broadcaster and regulation has, over time, grown into a system that supports an independent production sector to produce high quality French and English-language programs, and a set of regulations to ensure the exhibition of these programs.

From the data presented in Chapter 4, one can say that these programs have been very successful. The programs watched by French-speaking Canadians are predominately Canadian. Even in the difficult and competitive environment of the past 10 years there has been a substantial increase in the availability of English-language Canadian drama and an increase in the audiences for these programs.

As witnesses pointed out, children's programming in French and English is a deserved success story. About 50% of the children's programming watched by French-speaking Canadians in 2001-02 was Canadian-made, while 40% of the English-language children's programming watched by English-speaking Canadians was made in Canada.

That said, while there have been some successes, witnesses raised a number of troubling points about the current policies guiding the creation, production and exhibition of Canadian television programs. For example, witnesses were concerned that the various policies are not coherent and when taken as a whole are a "morass." In support of these claims, convincing examples of a policy environment where the support programs, content rules and exhibition requirements do not always make a great deal of sense were presented. This is why the Committee is convinced that witness concerns on these points are justified and that action must be taken. Accordingly:

Defining Canadian Content

Witnesses who appeared before the Committee were of two minds about the point system. Most could see that it had originated as part of an honest effort to support Canadian stories. That said, many of the producers and directors who work with the system were critical of the system's various components, particularly the contradictory nature of the requirements, its inapplicability to various genres, the arbitrary nature of subjective decisions made by officials, the paper burden and the sense that the point system and federal support measures did not support the efficient development of projects.

The point system was originally a checklist of objective indicators that allowed officials to decide whether a project qualified for a tax credit. As one of the background studies prepared for the Committee notes, Canadian content rules are supposed to be a "procedural definition, indicating the nationality of the creative workers, not a substantive one."⁵² However, it is apparent that the system has not only become an arbiter of what is, or is not, "distinctively Canadian" (and what is, or is not, worthy), but an unwieldy support structure unparalleled in any other Canadian cultural program.

Looking over a longer historical period it can be seen that problems with the current system began with the gradual shift toward the notion of "distinctively Canadian" and the belief that such a concept could be determined by a point system and subjective criteria administered by various departmental and agency officials. Why this happened may have more to do with inadvertence rather than conscious design; it is likely that the system simply accumulated small contradictions over time, many of which were introduced to encourage the development of the sector or to correct past shortfalls.

What is not clear, however, is whether those involved realized how fundamentally they were shifting the ground. For example, the existing rules now limit the pursuit of particular representations or genres. Consider the CTF's 2001-02 rules for the storyline of children's and youth programs:

In the case of programs targeted to children aged six and under, projects set in non-specific non-identifiable imaginary universes will qualify for these points. ... Settings in imaginary places that can be identified, such as a particular foreign city, are not eligible for these points.⁵³

While these rules were surely conceived with the best intentions, their drawbacks are easily exposed when applied to science fiction. Science fiction is a genre that typically deals with advanced technologies and transgalactic or globalized cultures that are not specific to a time or place. Star Trek, for example, deals with the exploration of space in the 23rd and 24th centuries. The various spacecraft have crewmembers from Earth as well as many other imagined planets (e.g., Mr. Spock from Vulcan; Mr. Worf, a Klingon). It would be difficult to imagine, therefore, how these series could have been made "distinctively" (and consistently) Canadian through the insertion of beavers, mountains or a Canadian skyline.

Another way to think about the existing Canadian content point system is to consider how it would apply to some of the great films of the twentieth century. Some films are about a very particular time and place. Most people, for example, would agree that The Maltese Falcon, The Four Hundred Blows, Battleship Potemkin, The Seven Samurai and Mon Oncle Antoine are, respectively, distinctly American, French, Russian, Japanese and Canadian.

In stark contrast, it is much more difficult to situate Lawrence of Arabia, Schindler's List, The Seventh Seal, or Metropolis. While their directors were, respectively, British, American, Swedish and German, few would argue that these films are "distinctively" about a particular country or that they reflect the citizens of a particular country to themselves.

Lawrence of Arabia is as much about the desert and war as it is about Lawrence. Very little is set in England and those who have seen the film remember the desert scene where a speck appears on the horizon and is slowly revealed as a lone man riding a camel. Steven Spielberg's Schindler's List, although set in Poland, Czechoslovakia and Israel, is not about those countries or their citizens, but resisting evil. Ingmar Bergman's The Seventh Seal has the Knight returning from the crusades and Death as its central characters; it might be set in thirteenth century Europe, but it is not set in a particular country and the characters have no particular nationality. Fritz Lang's Metropolis might have been made in Germany, but it is science fiction about technological progress run amok in a city filled with human despair.

While these films are specific to a time and place, they are not about particular countries, but about individuals who are outside a given society. Although Lawrence is British, he is outside England; Schindler is a conman acting against the Nazis, and no one would think it important to mention that he is a native of Czechoslovakia. The Knight in the Seventh Seal and the hero of Metropolis are without nationality.

If we apply the existing Canadian point system to these films, however, none would have qualified for full funding support.⁵⁴ At best, they might have received indirect support under a looser set of rules (e.g., 6 out of 10 points) that apply to what is described as an "industrial production." But no average citizen would ever use such an expression to describe these films. As Ms. Gretha Rose told the Committee: "When it comes to the criteria you have to meet in the CTF for content, if I am doing some of the great Shakespearean works, I'm disqualified."⁵⁵

Further light can be shed on how peculiar the point system for Canadian content production has become by looking at the criteria used to support talented Canadians in other disciplines. No point system, for example, is used to decide on support to writers who publish poems, novels, plays or in magazines. Quite simply, a Canadian author's work is considered Canadian provided a Canadian-controlled company publishes it. The text does not have to be about Canada, reflect Canada, be distinctively Canadian or even mention Canada.⁵⁶

Similarly, there has never been any attempt to suggest that a sound recording should be "distinctively Canadian." Canadian artists write and record country and western tunes, hip-hop, folk, jazz and classical music without anyone wondering whether it is "distinctively Canadian." In a similar vein, when we award research grants to promising students or researchers, we do not ask that they generate "distinctively Canadian" results or papers. Moreover, unlike television or film, no one expects events staged by The Stratford Festival, The Canadian Opera Company or The Montréal Symphony Orchestra to be "distinctively Canadian" or to represent "our stories" (even though these groups depend on support from the Canada Council for the Arts).

Figure 5.10 compares various types of federal support programs for creators. The most striking point about this figure is that all of these support programs, except those for television and film, do not involve concepts such as "distinctively Canadian" nor do they involve a recapture of equity. The imposition of "distinctively Canadian" criteria has led to a third peculiarity: to decide that something is "distinctively Canadian" means that a determination must be made by officials. This is surprising since the Government of Canada has always gone to great lengths to make sure that officials are not involved in making decisions about what is worthy. In other funding agencies (e.g., the Canada Council, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council and the Medical Research Council) decisions about whom to fund or what to fund are made by juries of peers and not by officials. Officials administer the process but they do not make the decisions. Television and theatrical films are the only exceptions to this longstanding practice.

The idea that there should be equity recoupment is also at odds with other federal government support programs. Support programs for book and magazine publishers are designed, in part, to improve the economic viability of the book and magazine industry. If book or magazine publishers make a profit at the end of the financial year they are not expected to return part of the profit to the government. By extension, given the rate of return for television programming in those categories that need subsidy (e.g., children's, documentaries, drama) is so marginal, why is there an equity investment program to recoup money?

The question would not need to be asked if the program recouped a large percentage on the amounts invested, but it does not. According to a recent study, the equity investment program recoups between 10% and 12% of the money invested.⁵⁷ As the authors of the study point out:

Currently, EIP recoupment averages between 10-12% of annual EIP funding. This is a very low figure for a program that, in theory, is supposed to generate at least some money to reinvest into the industry. This low rate leads us to believe that the recoupment process is artificial and is used to justify the funding of projects that are judged culturally or artistically worthy, but are not necessarily ever going to be profitable.⁵⁸

Why, then, do we make a distinction for Canadian television programs that we do not make for songs, poetry, printed stories, research or athletic achievement? And why is television, along with film, the exception?

There are at least four possible reasons. First, it is very expensive to make a high-quality dramatic film or television series, therefore, there is a natural desire to keep as much of the investment in Canada as is reasonably possible. Second, it is undeniable that "our stories" are important and that they need to be told; in part, for public interest reasons recognized as early as Aird, and in part because it would be an odd country if our stories were not told. Third, it may be that television drama has acquired a form of cultural significance that does not apply to other creative fields because it reaches a much larger audience. And fourth, drama, historically, receives the greatest number of viewing hours of any genre by a large margin.

While the logic underlying the above reasons may seem understandable, it does not help explain why we reward "distinctively Canadian" stories, rather than stories told by Canadians, for Canadians. Consider, for example, the film based on Farley Mowat's book, Never Cry Wolf. Although based on a book by a successful Canadian author, this film is not considered "Canadian content" by any existing federal measure. Similarly, Michael Ondaatje's, The English Patient, an internationally successful novel and film, does not qualify as Canadian even though it is a Canadian story, has many visibly Canadian elements and, as a film, won nine Academy Awards.

In short, the rules governing what is or is not Canadian have become so complex that they defy easy description or explanation. They are contradictory, produce absurd results and do not make creative sense. This helps explains why so many witnesses used words such as "absurd", "topsy turvy" and "a mess" to describe the current Canadian content points system.

Accordingly, the Committee is of the view that the existing point system that drives certification of a Canadian production now encourages, albeit in an indirect way, an economically unviable approach to the creation of some Canadian television shows. Furthermore, the notion of "industrial production" as opposed to "distinctively Canadian" only serves to perpetuate this confusion. The use of the word "industrial" in television is a pejorative expression, designed to convey the impression that an "industrial" Canadian production is somehow less worthy than a "distinctively Canadian" production.

The Committee also believes that the various definitions of Canadian content that are now used by our broadcasting system's decision makers need to be rethought. The Committee heard an abundance of evidence from witnesses across Canada that the existing bureaucracy too often prevents our creators from creating.

The Committee believes that the system would be easier for all if the definitions of "Canadian content" assumed that a production made by Canadians is Canadian. Furthermore, the Committee is of the view that greater flexibility would be achieved if differences among programming genres were recognized. To illustrate, the type and number of creative people typically vary from one type of production to the next and are not always applicable, or required, for certain categories; as such, a rigid set of criteria is unworkable. Moreover, based on information provided to the Committee, while 89.7% of 1,073 CAVCO certified productions in the drama category in 2001 were based on 10 points, only 5.4% of 1,860 documentaries were based on 10 points. Clearly, a level playing field is required.

With this in mind:

In addition:

Such a system would involve placing more trust in creators and would allow Canada's creators to do what they do best — create. As this committee pointed out in its 1999 cultural policy report, A Sense of Place, A Sense of Being: "The Government of Canada cannot create a work of art but it can do much to encourage the creators and visionaries who will give Canada the gift of a living culture to enjoy, preserve and share with the world."⁶⁰

Furthermore, as this chapter has revealed, the existing policy model has had only modest success in increasing viewing to English Canadian drama. Regulation can ensure that Canadian drama is available; subsidy can ensure that it is produced and even promoted to some degree; but unless there are major changes it will be very difficult to increase viewing significantly. As such, an absolute requirement is a vastly improved measurement system for determining how and when Canadian programs are being watched. For this reason:

Tax Credits and Direct Funding

Tax Credits

The main problems with the tax credit system that witnesses raised had to do with the definitions of Canadian content and the way in which funding criteria and provincial tax credits have been stacked on top of the federal system. There was general agreement, however, that the tax credit system in its current form is an important form of support for the production of Canadian television programming. One of its most attractive features is the fact that it is completely objective. If the tax credit system could be made more flexible (e.g., by recognizing important differences among

genre) the Committee believes it could become an even more effective instrument to support the production of Canadian content. For this reason, the Committee believes that the impact of the current system should be studied. Accordingly:

Furthermore:

 Direct Funding

As this chapter points out on several occasions, the Committee heard a litany of complaints about the ways in which Canadian Television Fund (CTF) and Telefilm interpret and apply their respective mandates. The Committee was also sensitized to the confusion and excessive administrative burden that arises from Telefilm's running of the Equity Investment Program on behalf of the Canadian Television Fund.

Programs produced for television represent more than 60% of the total value of the audiovisual (film and television) industry in Canada. If foreign location shooting is excluded then television represents an even higher portion of the Canadian audiovisual industry. Given the significance of the production of television programs both to cultural goals and related industrial goals (e.g., employment of Canadians) it is surprising that the governance structure of the CTF is as convoluted as it is. Witnesses raised this point in a number of different ways. In particular, they pointed to the

long and complicated approval process, conflicting objectives and the composition of the board of the CTF.

An evaluation of the CTF that was issued in 2000 made a number of comments — albeit controversial — about the structure and organization of the CTF. In particular, it suggested that the CTF's governance structure should be simplified and that it should not have to report to its own Board and Telefilm's. The evaluation also pointed out that the objectives of the CTF are not the same as those of Telefilm and that there should be some clarification as to what the CTF is expected to achieve. As an example, competing objectives include the cultural goal of supporting quality programs that will attract larger audiences and increasing regional production. The evaluation concluded:

The government has not prioritized its objectives. Over time the focus has been on trying to address multiple priorities while supporting the production of distinctively Canadian productions. Whether this has been the result of a need to rationalize the allocation of scarce resources, a recognition that funding can only be justified on cultural grounds, or because the support of distinctively Canadian productions is actually a top priority is not clear.⁶¹

While it is often the case that programs have conflicting priorities, confusion in the objectives and governance of the CTF is not encouraging. The goal of having high-quality Canadian programs in French and English has always been and will be for the foreseeable future a difficult challenge. In the Committee's view, the various layers of ambiguity and confusion about the goals of the various agencies designed to support achievement of the goals of the Broadcasting Act need to be clarified. The Committee is well aware that the CTF is a private/public partnership and that the CTF is not an agent of the Crown. Nevertheless, it is of the view that existing confusions in the mandate and governance of the CTF need to be resolved. Thus:

Furthermore, for the above recommendations to be effective, considerable changes to the mandate and operation of the CTF and Teleflm will be required. To this end:

The Committee also notes that the Canadian Television Fund (CTF), despite its problems, has become a key element in the financing of many Canadian productions. Indeed, Professor Catherine Murray's examination of the Fund concluded that: "Among all financing instruments to promote Canadian production, the CTF is the ... most cultural in its objectives."⁶² Witnesses often noted, however, that uncertainty over the government's intentions for the CTF discourages planning and investment.

The Committee sees it as imperative that support targeting the funds and community television be stable and not fluctuate annually based on the decisions made by Canada's cable operators. In particular, to ensure stable funding, the Committee believes that the current CRTC provision that permits a cable company to decide how it will divide its annual contributions to community television and the Canadian programming funds needs to be disentangled (see Chapter 9).

The Committee is also of the view that a refocused CTF should receive increased and stable funding.

Promoting Canadian Programming and Tracking Results

As noted in Chapters 3 and 4 (and as will be seen in Chapter 12), the digital transition will profoundly alter how we use the broadcasting system to encourage the viewing of Canadian programs. Current regulations encourage the viewing of Canadian content by setting weekly exhibition requirements, including special requirements for the exhibition of "priority programming" in prime time.

It is clear, however, that the transition to digital broadcasting and carriage will increasingly allow viewers to seek out and download individual programs, whether from broadcasters, via a PVR or over the Internet. For this reason, the use of exhibition quotas will have less impact and, by extension, the regulation of prime time exhibition will be less effective and meaningful. Therefore:

Furthermore, recognizing the complexity of the broadcasting environment and the importance of timely reviews of policy and program changes, the Committee is convinced that more timely and thorough assessments of these changes need to be carried out. Accordingly:

The CRTC's 1999 Television Policy

A theme that animated much of the witness testimony was grave concern with the perceived consequences of the CRTC's 1999 television policy, particularly its revised notion of priority programming. Indeed, a great many Canadian artists, creators and independent producers are of the view that English-language Canadian television programming is in crisis. Professor Murray echoed this view. She notes :

The decline in English Canadian television drama series (from 12 to 5, according to ACTRA) signals a crisis, according to the trade press in the summer of 2002.⁶³

Furthermore, many witnesses were of the view that distinctively Canadian drama and comedy have been disappearing from Canadian television screens given the greater flexibility that the CRTC's 1999 television policy granted private broadcasters. For example, it was asserted that CRTC policies now make it easier for broadcasters to exhibit Canadian programming in off-peak hours and to fill their schedules with reruns. Moreover, it was suggested that the new priority programming policy now allows broadcasters to sidestep the purchase or production of dramatic shows in favour of less expensive forms of Canadian programming, such as reality television series. According to Ms. Murray's report, "The Fall 2002 schedules for CTV and CanWest Global show just one (Canadian) series each in prime time."⁶⁴ She goes on to state:

The CRTC has resisted calling a review of its recent television policy decision despite widespread criticism. The effect of the policy was very early identified as undercutting demand for high Canadian content production. An apparent reversal in direction, with little or no co-ordination with the other agencies working the field, the decision has had considerable effect.⁶⁵

Running in parallel with these considerations, however, is an absence of data that corroborate witness concerns. As Mr. David Keeble told the Committee in a paper prepared for the Committee:

... when one looks at viewing statistics, it is not evident that the impact on the system, as seen by the viewer, has been great. Between 1999 and 2001, viewing to Canadian drama has fallen but not dramatically; viewing in the "other" category rose, and music/variety remained steady. It is not clear that the viewer noticed reduced emphasis on Canadian drama.⁶⁶

Similarly, the CRTC is of the view that it is too early to properly evaluate the impact of this policy but that:

In its renewal decisions, ... it would be monitoring and evaluating Canadian priority programming scheduling practices and related audience levels, in order to test whether the goals of the Television Policy were being achieved.⁶⁷

That said, the CRTC has recently commissioned Ms. Trina McQueen to study the state of English-language drama in Canada. One particularly well-publicized submission to Ms. McQueen is from the Canadian Coalition of Audio-Visual Unions (CCAU). The CCAU contends that there are two problems with the CRTC's television policy: first, a growing proportion of priority programming is made up of programming other than drama; and second, broadcasters are relegating such programs to times of the day and year when there are fewer viewers.

The Committee notes that the Coalition's submission to Ms. McQueen is important for two reasons. First, it shows the extent to which Canada's creators are — as a whole — deeply troubled by the impacts that they have felt in the short time since the introduction of CRTC's new television policy. Second, it highlights the need for more complete data on scheduling and exhibition.⁶⁸

The Committee is gravely concerned by what it was told by witnesses about particular elements of the Commission's television policy. The Committee believes that effective policy and regulation is crucial to the overall health of the Canadian broadcasting system. This is why it has concluded that immediate action is required to better understand how the Commission's new policy has affected the production, scheduling and exhibition of Canadian television programming. To this end:

The challenge of producing high-quality Canadian television programming has been with us since the 1950s. In light of this reality, it is the Committee's view that a clear and well-focused policy for the production and distribution of Canadian television programs such as drama, documentaries and children's programming is essential. Canada has a small market divided into two smaller markets (English and French) and the cost of quality television productions is very high. Given the challenges we face there has been considerable success. For example, as many witnesses told the Committee, French and English language children's programs do well in Canada and around the world.

In the Committee's view, the main challenge will be to focus more coherently on the objectives we set for the broadcasting system and the design of support measures put in place to foster these objectives. Efficient and effective support programs for Canadian television programming are absolutely essential and great care must be taken to ensure that such programs are in place, and that they are properly managed and funded. Although the future will be difficult, the Committee sees no reason why Canadian producers and broadcasters cannot build on existing success and continue to produce television programs Canadians will take pride in and want to watch.

Endnotes