CBC Cuts: Does Mother Know How to Budget? (Part 2)

The CBC has been through a tumultuous period but it is only going to get more challenging.  The CRTC financial data on the state of CBC indicate that CBC’s planning and basic budgeting tools are not up to the task of the changes and priorities CBC must choose from as it enters a period of reduced government funding.  Part 2 analyzes CRTC financial data relating to CBC staff levels and advertising revenues.  The data reveal that CBC French TV accounts for an inordinate number of staff and that despite reductions in government funding CBC staff levels are the same as in the late 1990's.  The data also show that CBC TV ad revenues haven't increased in a decade and a half, lagging the rest of the conventional, over-the-air TV industry.

CBC Staff Numbers

·  according to CRTC financial data, there were just under 9,600 full time employees at CBC for the year ending August 31, 2010, excluding staff working in unlicenced activities such as cbc.ca; CRTC data show in the years 2006 to 2008 total CBC staff was just over 10,000 people, meaning that there has been only a small reduction in CBC staff in recent years, despite the financial crisis in 2008-09.  Preliminary data for the year ending August 31, 2011 show that the staff count was unchanged from the previous year.  CBC claims that its resources have dwindled under both Liberal and Conservative governments, yet CRTC data show that the CBC has basically the same number of staff as it had in 1999. The average annual CBC salary in 2010 was just over $87,000, about $9,000 more than in the 2006-08 period

·        the CBC, like any bureaucracy, can be an unmanageable hydra. CBC has announced layoffs in the past two years, yet the numbers do not reflect much of a net loss in staff positions.  Without proper management systems the president and the Board can authorize staff cuts one month but have little control over hiring in the following months. An example of the left hand not knowing what the right hand is doing: in 2007, the CBC’s VP of human resources contradicted the CRTC data and publicly claimed that his “records” showed there were some 2,000 fewer CBC staff than the Corporation reported to the CRTC. When CMRI shared some of these 2010 staff numbers with a CBC vice-president he expressed surprise because he couldn’t “match the numbers...with the reality that I observe…day-to-day,”  meaning that while many people have been laid off or left CBC in the past year, they seem to have been soon replaced, perhaps at lower starting salary

·        one anomaly in the salary data: while CBC TV (-11%) and CBC Radio (-13%) decreased salary expenses in 2010, CBC News Network increased salary expenses by 12%

·        CBC Radio had 2,500 employees in 2010, while all commercial radio stations employed just over 10,000 employees in that same year. In other words, CBC Radio employed roughly 20% of all persons working in Canadian radio.  The number of people employed in private commercial radio has been basically unchanged in the past 5 years (find details on commercial radio at this CRTC link)

·        CBC TV had 6,200 employees in 2010, which represented about 50% of all the persons working in Canadian TV broadcasting.  Commercial TV stations and networks (i.e., CTV, Global, CITY, TVA, V, etc.) had just under 6,300 employees that same year

·        one striking trend in the CRTC data is that commercial TV stations have reduced the number of persons they employ by approximately 2,000 in the past 5 years (find details on commercial TV at this  link to the CRTC data).  That is, private TV, facing a more competitive media landscape and a recession, reduced its staff by about 25%, while CBC seems to have maintained its staff numbers basically at pre-recession levels

·        one critical number not available anywhere publicly is the number of unionized vs. non-unionized (management) staff at CBC.  It is possible that if good management systems were in place, a large number of managers could be cut from the payroll and savings could be re-directed to creative, programming areas

·        another example of how for no apparent reason one area of CBC can swell in size compared to other areas is to be found in the different staff levels of the four major CBC program areas.  CBC English radio had 1,500 staff in 2010, while CBC French radio had 1,000, that is, the French service had roughly two thirds as many people as the English radio service, a ratio that on face value seems reasonable given the services provided by the two radio services across the country.  Yet that same year CBC French TV had more staff (3,200) than CBC English TV (3,100), which appears irrational given the services requirements of the two TV services, not to mention the staff ratio in radio.   In 2010 the CBC French TV service generated about $100 million less in advertising revenue and had a budget almost $200 million dollars less than its English counterpart, yet had more people on staff.  In my 40-year association with CBC I can't recall this discrepancy in staff levels having ever been discussed.  It is one of many indicators that CBC management lacks the necessary controls to manage the organization properly.  These CBC-specific data can be found at the CRTC web site.

Advertising Revenue

·        in 2010 advertising revenue for CBC TV increased by a seemingly robust 14%, above the industry average, with total ad revenue of $367 million.  This was partly accomplished and offset by the $20 million increase in sales and promotion expenses noted earlier.  Note that CBC TV sales and promotion expenses were a far greater proportion of ad revenues than was the case for private TV in 2010

·        advertising revenue for the industry in general rebounded after the recession by almost 10%, meaning CBC ad revenues, all else being equal, would have increased regardless.  The $367 million revenue figure is considerably higher than the ad revenue CBC reported in its 2009-10 annual report and seems an amount larger than can be explained by the different fiscal periods used by the CBC and CRTC reports

·        according to CRTC, ad revenue from the two main CBC TV services was some $338 million in 2010.  CBC has revealed to the CRTC in the past that in the mid-1990’s the two main CBC TV networks generated roughly $350 million in annual ad revenue, meaning that CBC sales has not grown revenues in well over a decade, not even keeping up with inflation. Canadianizing the schedule cannot be blamed because, if anything, there is less Canadian programming on CBC TV today than 15 years ago

·        Private conventional TV, which has been subjected to the same audience fragmentation and other economic pressures in the past decade and a half, has grown ad revenue by almost 30%, an indicator that CBC sales is not tightly managed and perhaps the strongest indicator that CBC management lacks necessary controls over the organization and is ill-equipped to deal with the $115 million-plus budget cut

·        a person knowledgeable about the ad business with whom I consulted believes that advertising “skews their mandate and in any case it costs them more than they make.”  If advertising is to be pursued by CBC TV, which is certainly arguable given past performance and the cost of sales and promotion, then Sales needs to be managed and be a central pre-occupation of senior managers.  The sales function within CBC can be the most perplexing and challenging for senior management.  Often no senior manager at CBC has had any sales or related experience and sales is treated as a difficult, arcane function best left to its own devices.  The head of sales must be involved in key executive meetings and decisions or risk being further isolated. Sales in most companies will go to great lengths to closely guard information that can be used to set their targets and evaluate performance.  Thus, controlling basic data and establishing effective systems to manage Sales should be a priority for senior managers.  The president at the push of a button should be able to monitor revenues on a daily basis and answer any query about which programs are producing revenues and which are not.  For example, how much revenue is generated by sports, especially the NHL?  If Sales cannot be tightly managed internally, then perhaps it should be outsourced, which would be a logical step if CBC were to only carry advertising in sports programming
 ·        the minuscule ad revenues for bold, ARTV and the Documentary Channel should lead CBC management to question why these channels are in the ad business and might be better re-positioned as ad free services. bold and The Documentary channel generated only about $100,000 each in ad revenue in 2010 yet had sales and promotion budgets roughly seven times that amount

·        the ad revenues of CBC News Network and RDI combined, while more substantial than the other specialty channels, accounted for less than 5% of all CBC ad revenues, which again should lead CBC management to question the relative value of this source of revenue in today’s multi-channel universe.  CRTC and subscribers could be convinced that in exchange for ad free news channels, a small increase in subscriber fees would be warranted which could make up for lost ad revenue

·        If advertising sales were a main pre-occupation of senior management, CBC could generate considerably more revenue from the main TV networks and improve CBC’s specialty channels by reducing or eliminating advertising

The CRTC financial data reviewed here are a valuable source of information about the CBC.  These CRTC data shed light on the underlying management processes within the CBC, permit macro-evaluation of management decisions and point to potential new strategies, new revenues and cost savings for CBC TV and radio. That is, analysis of the CRTC data can be used by policy makers and the CBC as a first, rudimentary step toward establishing improved management systems and controls at the CBC.   Such controls are essential if CBC is to deal with its $115 million budget cut.