CRTC VP Pentefountas dissents on Radio-Canada adverts

[DanNospamSay]

Hubert LaCroix estimates about 6 to 9 million
dollars in
revenue in a press conference on Tuesday

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A Montreal lawyer and friend of Stephen Harper's communications
director has been named vice-chair of the Canadian Radio-television
and Telecommunications Commission - an appointment the NDP says was
marred by improper interference by the Prime Minister's Office.
"There is a sort of glazed over effect that Canadians have with the
outrageous behaviour of Harper, but this one pretty much takes it,"
NDP heritage critic Charlie Angus said.
Heritage Minister James Moore announced Friday that the job of vice-
chair of the commission that regulates and supervises Canadian
broadcasting would go to Athanasios (Tom) Pentefountas, a partner in
the Montreal law firm Silver Sandiford whose public work appears to
centre on his role in the Montreal Hellenic Chamber of Commerce.
Globe and Mail Published Friday, Feb. 04 2011, 6:09 PM EST
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Towards end of long 40,000 word CRTC decision

http://www.crtc.gc.ca/eng/archive/2013/2013-263.htm
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Dissenting opinion from Vice-Chairman Tom Pentefountas

The Canadian Broadcasting Corporation/Société Radio-Canada (CBC/SRC)
filed applications to amend the conditions of licence of Radio 2 and
Espace Musique and of all the stations affiliated with these networks
to authorize the broadcast of national advertising. The applications
were submitted in response to the decreases in anticipated revenue, in
particular the reduction in parliamentary appropriations granted to
the CBC/SRC. The public broadcaster proposed that advertising be
introduced progressively: a limit of five minutes per hour in the
first year, gradually increasing until the restriction was lifted in
year four of its five-year licence term.

The key issues the Commission addressed are:

The 965 interventions received, in which comments were directly
related to the amendments regarding advertising, and of which 893 were
in opposition.

The interveners who appeared at the hearing and opposed the
application included the Canadian Association of Broadcasters (CAB),
the Ontario Association of Broadcasters, Les amis de Radio-Canada, the
Public Interest Advocacy Center, Cathy Hunt, Mark Goldman, the
Alliance des radios communautaires du Canada and Corus. Small private
broadcasters, including Attraction Radio, MZ Media and JazzFM, also
intervened in opposition to the application. The Association
québécoise de l’industrie du disque, du spectacle, et de la vidéo
(ADISQ) commented on the matter, but did not take a clear position on
the applications relating to advertising. The Canadian Independent
Music Association (CIMA) reluctantly supported the applications. The
interventions in support of the applications included that from the
Montréal Symphony Orchestra.

Several interveners were concerned about the adverse effect that the
objective of maximizing advertising revenue could have on the
programming of these networks and on the dilution of their particular
contribution to the Canadian broadcasting system. Several considered
that many listeners would be dissatisfied and would either tune in
less or stop tuning in to their channels completely. According to the
opposing interveners, adding advertising would greatly diminish what
sets Radio 2 and Espace Musique apart from other broadcasters
operating in the same markets.

Certain commercial broadcasters submitted that approval of these
applications would be tantamount to adding a new commercial service in
the markets served by the networks. Community stations were concerned
about the decrease in the government advertising they currently air.
The CAB criticized the definition of “national advertising” proposed
by the CBC/SRC. According to the CAB, the proposed definition was too
general and could potentially allow the CBC/SRC to generate local and
regional advertising revenues.

Several interveners argued that approval of the applications could
make it difficult for the Commission to deny future similar
applications for the more popular services Radio One and Première
Chaîne.

I am of the opinion that the above clearly and objectively describes
the status of the application file. With all due respect to my
colleagues on the hearing panel, I made every effort to agree with
their point of view, but I cannot in good conscience agree with the
licensee’s request. It gives me no pleasure to take this position, but
I would like to state from the outset that I am firmly opposed to the
application to amend the licences for Radio 2 and Espace Musique to
allow them to broadcast advertising by national advertisers.

Several interveners cited examples from overseas; for context, I will
use a few excerpts from Cogeco’s submission:

[TRANSLATION] In France, faced with the need to reduce the State’s
budget deficit, the new socialist government elected in May 2012
imposed a significant reduction in the parliamentary appropriations
granted for the operation of France Télévision. In an article
published in the 2 October 2012 edition of Les Échos, entitled “France
Télévision va devoir fonctionner avec 160 millions de moins que
prévu,” the French financial journal reported that:

[TRANSLATION] […] In this context, Aurélie Filippetti, Minister of
Culture and Communication, called on the group to review its editorial
policy and, despite thinning resources, further distinguish itself
from the public service. She stated to the AFP: “The race for ratings,
on the same playing field as the commercial channels, is not the right
way to envision a strategy for the public broadcaster.”

And I would like to emphasize Minister Filippetti’s last statement.

[TRANSLATION] Across the Channel, the public broadcaster BBC, whose
primary activity is not publicly funded, is also faced with the need
to reduce its expenditures as a result of a 16% decrease to its
government funding. In an article dated 6 October 2011 that appeared
in The Guardian, the newspaper reported that:

The BBC will axe nearly 2,000 jobs (12% of its workforce) as it looks
to save 670 million pounds ($1B) a year in long-awaited cost-cutting
plans announced on Thursday morning (6 October 2011).

The changes will see more repeats on BBC 2, fewer entertainment shows,
less money spent on sports rights and a shrunken BBC 3 and BBC 4.
There will also be wide-ranging cuts to the BBC’s radio output [...].
The proposals outlined by the BBC will result in a total saving of 20%
of the BBC budget.

As mentioned by Cogeco, what is particularly informative from the two
examples above and thus so troubling for the Canadian file that
concerns us is that neither in the case of France Télévision nor in
the case of the BBC did the public broadcaster’s solution following a
decrease in government appropriations result in an increased
commercialization of its services.

In its initial application, the CBC/SRC requested revenues of $16
million in unlimited advertising. My colleagues decided to allow up to
four minutes of advertising per hour. At best, the CBC/SRC would
therefore make not more than $11 million in revenues. I will not go
into further detail on administrative management proposals, which is
beyond my mandate, but I find it perplexing that a broadcaster funded
in large part by Canadian taxpayers would ask for $11 million out of a
budget of $1.85 billion. That said, and not wanting to downplay the
budget deficits with which the CBC/SRC is contending, I find it
unfathomable that we’re upsetting the balance of the Canadian radio
broadcasting ecosystem for $10 million in revenues in the case of
Radio 2 and a few million dollars in the case of Espace Musique. As
the difference seems insignificant, it is a double insult for private
broadcasters and the public itself.

My deepest concern is that the proposed changes for Radio 2 and Espace
Musique will fundamentally and irrevocably change the nature of the
service and the unique radio listening experience for audiences.
Especially since I do not believe that the regulatory panacea that the
public broadcaster is requesting of the Commission is the only means
at its disposal to ensure that it can continue offering the distinct,
quality radio programming that is so important to Canadians, if we
rely on the interveners’ testimonies.

According to the CBC/SRC, the proposed changes constitute an effective
means of increasing revenue with minimum impact on audiences and
licensees, as stipulated at paragraph 10 of its amendment application
submitted on 4 April 2012:

[TRANSLATION] To be able to continue to operate its two music radio
networks in their current form, the Corporation must find new sources
of revenue so as to at least offset a part of the shortfall resulting
from the decrease in its public funding.

I am convinced of the opposite.

In the case of Radio 2, this is 98% of its revenues, as stated in the
initial application, which in my opinion is a large portion of the
shortfall. The Commission’s approval of this application would have a
significant impact on the distinct character of the service and
consequently on audience enjoyment of and satisfaction with the
service. Moreover, the Canadian broadcasting system runs the
unnecessary risk of being thrown into disarray.

Without giving a history lesson on the subject, it is well known that
advertising on CBC/SRC radio was abolished in 1975. Consequently,
approving the licensee’s application will be inconsistent with the
Commission’s historical position and with the public’s expectations.

Interveners’ submissions and the public are rarely mistaken, and their
categorical opposition to this change in the nature of the public
service was almost unanimous. Now, over the last year, the Commission
has attached greater importance to consumers’ needs, perceptions and
desires. In this decision, it seems to me that we are not sufficiently
considering the recommendations and opinions of the most faithful
supporters and shareholders of the public service because let’s not
forget that consumers are also CBC/SRC shareholders who to a great
extent fund it with the taxes they pay. All for the sake of a couple
of million dollars, this decision goes against the wishes of those who
count the most: the consumers-shareholders of this Crown corporation.
In light of the consumer-focused approach, I believe that we should
have instead adopted the opposite position and denied this
application.

It is also well known that it this not the first time that the CBC/SRC
is facing a cut in parliamentary appropriations. So why has no CBC/SRC
management group thought of asking for authorization to increase
revenue through radio advertising up to now? I believe that it is only
logical to think that those managers knew that the impact on
listenership would be considerable and that the nature of the service
would be irremediably deformed and transformed forever. This would
have tampered with the CBC/SRC’s rich radio tradition and the clear
need to differentiate itself from private broadcasters, which would be
against the public interest.

I am strongly of the opinion that the nature of the service will
change as soon as the funding of operating costs hinges even minimally
on advertising revenue shares. The licensee will become more and more
dependent on audience ratings, which will influence the sound and feel
of its programming. Listeners will perceive a deterioration in the
service and will begin to tune in less and less or will stop listening
altogether. They will notice that the sound has changed, increasingly
resembling that of commercial radio. Not only will approval of the
proposal destroy a rich heritage, listeners will question the role of
CBC/SRC in the Canadian broadcasting system, as well as the CBC/SRC’s
use of public funds.

We are also able to see that programming on Radio 2 and Espace musique
has evolved and is likely to evolve even more, to the point where it
will no longer be distinct.

Clearly, the Commission should not support the public service’s
current management, which favours the race for advertising revenues,
which will necessarily change the nature of the service.

The CBC/SRC already leads in all major Canadian markets (except in
Toronto, where it is second). Opening it to the advertising market
will only consolidate its position in all markets, to the level of a
second music service competing not only with the private industry, but
also with other initiatives by potential future entrepreneurs.

To summarize a quote by Stephen Harper on 29 November 2004 that was
included in the intervention from Friends of Canadian Broadcasting:

With more specific reference to English-language CBC, its radio
services have remained non-commercial, giving its audiences a
programming with which they are generally satisfied and which is seen
as unique. However, English-language television has tended to become
more commercial, more in direct competition with private television
[...].

We believe that CBC English-language television should become, and
will have to become, more distinctive if it is to remain viable and
fulfill its role as a unique public broadcaster. We should consider
giving it a mandate that clearly articulates its role as a unique
Canadian broadcaster [...].

Along the same lines, we would seek to reduce CBC’s dependence on
advertising revenue and its competition with the private sector for
these valuable dollars [...].

As to the impact on the Canadian broadcasting ecosystem, it will be
twofold: first, in the smaller markets, and second, among stations
with small market shares in the larger markets.

The CBC/SCR has provided no evidence to support its claim that it will
be able to increase the advertising pie. And yet the burden of proof
is on it.

To claim that national advertisers are going to invest new money to
reach the audiences of Radio 2 and Espace Musique is unrealistic and
unfounded. It goes against the major trends that show a shift in
advertising investment from traditional media to the web and
applications.

Add to this unfounded claim that the CBC/SRC will be able to offer its
services for lower prices or even for free to national clients in
small markets through campaigns negotiated in larger markets. The
licensee could also offer advertisements on several platforms, which
will place it at an unfair advantage in relation to regional stations
in smaller markets or to the smallest stations in large markets. One
likes to think that the CBC/SRC will sell television/radio campaigns
to certain national advertisers and that this cross-selling strategy
will place the public corporation in a position of strength vis-à-vis
smaller broadcasters. But what will the impact of such a commercial
approach be on the diversity of voices?

The CBC/SRC has another trick that is raising serious doubts and which
should concern Canadian taxpayers. This is the creative accounting
with which the licensee is arbitrarily bleeding its Radio 2 service to
justify its application. In fact, the CBC/SRC intends for almost all
of Radio 2’s revenues to come from advertising sales. In its letter to
the Commission dated 16 July 2012 regarding the application to amend
the licences for Radio 2 and Espace Musique, it clearly indicated that
should the licence amendment application be approved, Radio 2 would no
longer receive parliamentary appropriations. The CBC/SRC anticipates
that nearly all (98%) of Radio 2’s revenues will come from advertising
sales. Keep in mind that the licensee expressed the intent to at least
compensate a portion of the shortfall. I would say that 98%
constitutes more than a portion.

This behaviour is at odds with two of the licensee’s traditional
practices. The first is the practice whereby all revenues go to the
general fund and are then distributed according to management
priorities to the various services. In the documents submitted by the
licensee, it is clear that its management is intentionally cutting
Radio 2’s allocation while almost entirely protecting Espace Musique’s
budgets. This is a departure from the traditional 60/40 distribution
between English- and French-language services. Here the French-
language service’s rations are barely cut, while almost the entire
budget for the English-language service is cut in support of its
application, upsetting the linguistic balance of services offered.
Intentionally spreading panic among English-language audiences is
highly inappropriate. The CBC/SRC is thus causing a famine in its
services for English-language audiences and negatively affecting its
tuning and perception in this market. I find this strategy highly
inappropriate for a publicly funded broadcaster and insensitive vis-à-
vis its responsibility to reflect Canadian culture, connect Canadians
and promote national unity and social peace between our two official
languages.

Moreover, the Commission has demonstrated considerable flexibility and
understanding regarding to the licensee’s budgetary challenges. We have
—myself foremost—authorized several reductions in the CBC/SRC’s
regulatory burden. Through these very generous reductions, the
Commission has allowed the licensee to save several tens of millions
of dollars.

In spite of those considerable savings, the CBC/SCR continues to
prioritize advertising over radio services. One must question why,
particularly since the sums in question are so small.

I understand that the whole thing will be re-examined in three years,
but allow me to be skeptical. As the expression goes, it’s very hard
to put the toothpaste back in the tube. Setting aside the CBC/SRC for
a moment, how will the Commission repair the harm done to small
private broadcasters? Where is the in-depth market analysis that is
usually requested by the Commission before opening a market to a new
entrant? How many private radio jobs are at risk?

The Commission is putting itself in a position from which it will be
very difficult if it wants to remain consistent for it to refuse to
extend this option to the public service’s talk radio stations.
Whether the CBC/SRC’s sales team succeeds in reaching its commercial
advertising revenue projections or fails in its efforts, the
temptation to find reasons to ask for even more will be too great.
Furthermore, many interveners expressed fear that this application is
so important because it will pave the way for the “true application”
seeking advertising revenue on Radio One and Première Chaîne. I
understand that the licensee has denied all this and that the
Commission did not accept these arguments, but I would like to draw
your attention to the filing of the licence renewal application in May
2011, where the CBC/SRC committed not to broadcast advertising on
Espace Musique and Radio 2. Less than a year later, that commitment no
longer holds. Reasons and justifications can always be found or
created for the licensee to ask for more, including such very
legitimate reasons as a drop in advertising revenues or parliamentary
appropriations. But the fact remains that the CBC/SRC has done an
about-face with respect to its May 2011 commitments. If the recent
past is any indication of the future, how can we believe the CBC/SRC’s
statements today?

First, it’s a very slippery slope once the door is opened to the
commercialization of public radio, and second, it seems crystal clear
to me that the commercialization of Espace Musique and Radio 2 will
trigger the disappearance of the distinct and complementary character
of those services.

As a consequence, a distinct service that is highly appreciated by the
public will be completely altered and lost forever. This crazy pursuit—
and I emphasize the term—will destroy the very exemplary trademark
character that these services enjoy among Canadians. Can we in good
conscience destroy a brand that is so valued, built on decades as a
radio listening experience that is truly different from that of
private radio, with a distinctive sound that is the key to its success
with audiences?

All this to say that I fear that the adverse effects of this decision
will be very difficult to reverse.