Thursday 29 November 2012

How to Fund the CBC: A Modest Proposal


Canadians spend an exceptional amount of their discretionary income on communications and media. Canadian households spent just over $3,000 in 2010 on communications and media, which includes phone service, cell phones, internet, cable/satellite TV, purchase of new TV sets, DVDs, iPods, tablet and personal computers, etc. This is summarized in the table below:


Also shown in the table is that Canadian households spent (through their taxes) $88 on CBC/Radio Canada TV and radio, which represented just under 3% of total communication and media expenditures.

The federal government recently cut the budget of CBC by about 10% and CRTC cancelled a local programming fund that cable and satellite subscribers pay.  These cuts will come into full effect over the next two years.  To offset these cuts and to provide a source of future funding for CBC/Radio Canada, the government through an Order in Council should implement a voluntary levy on all communication and media services.  All cable, satellite, phone, cell phone and internet companies, as well as retailers of audio and video equipment, would be required to ask customers in each billing period if they would like to make a voluntary contribution to maintain and improve national and local programs on CBC TV and radio. Smaller purchases at Best Buy, etc. would not be included.

CMRI's Media Trends Survey reveals that a percentage of Canadians willingly donate to PBS and other public broadcasters, as shown in the chart below:   

CBC TV and radio attract substantial audiences and our surveys over the past decade have shown that Canadians of all political stripes are very supportive of CBC. A voluntary communications levy would function much like requests for charitable donations at liquor stores or other retailers, which appear to be very successful.  Because this program would be ongoing and apply to all major purchases, retailers and service providers would be paid a commission for collecting the levy.

CBC’s loyal listeners and viewers would likely be willing to make voluntary contributions to maintain CBC services and it is possible that the recent cuts in CBC funding would be made up with a communications levy.  Who knows, maybe such a levy could raise all the funding that CBC requires in future years and the government would no longer have to fund it through general tax revenues?

The 2011 survey results are from CMRI's Media Trends Survey conducted November-December 2011 among a representative national sample of approximately 900 Anglophone respondents aged 18-plus.  Margin of error +/-3.3%.  The Media Trends Survey has been conducted for ten consecutive years and has surveyed over 15,000 Canadians in total. In our analysis we usually only report Anglophone results.   Both Anglophones and Francophones have been surveyed in this period, using questionnaires in each respective language.  Francophones have been surveyed in 5 of the 10 years.  To compensate for poorer response rates among younger adults results are statistically weighted in keeping with industry standards.  It is the only survey to have measured media use and attitudes continuously over this decade. The Media Trends Survey is not sponsored by any one industry or affiliated with a media company.

Monday 26 November 2012

Is CBC a Sports Channel?


How much do CBC and the other networks spend on sports programming?  How much advertising revenue do these networks generate?  Does CBC lead all networks in sports expenditures and advertising revenues?

The table below summarizes Canadian sports program expenditures of CBC, CTV and the sports specialty channels in the years 2008 to 2011:





CBC in 2008, a year it held Olympic rights, spent $180 million on sports programming.  This declined to $139 million the following year, the first year of the CBC’s current NHL contract, and increased to about $150 million by 2011.  CTV, as expected, spends very little on sports; it spent virtually nothing in the 2011 broadcast year.  Only in 2010, the year CTV and Rogers shared rights for the Vancouver Olympics, did CTV spend heavily on sports.  That year CTV identified spending $137 million dollars on sports programming, meaning it paid dearly for the Vancouver games. 

The three sports specialty channels, despite having to fill 24 hours a day with sports, each spend less on Canadian sports programming than the CBC.  In 2008 and 2009 TSN and Sportsnet had total program expenditures of between $92 million and $122 million.  In 2010 expenditures of TSN/Sportsnet, who also aired the Vancouver Olympics, increased noticeably and in 2011 both were at $140 million.  RDS spends roughly half what its English counterparts spend, some $66 million in 2011.  So in terms of expenditures on Canadian sports, CBC leads all networks, including the three all sports channels.

The table below shows the total ad revenues of CBC TV, CTV and the sports networks in the past four years:
 



In 2008, with the help of the Beijing Olympics, CBC had ad revenues of $253 million.  Revenues declined precipitously in 2009, as did the revenues of most companies during the 2008-09 financial crisis; they rebounded in 2010.  Last year total ad revenues of CBC were $246 million.  Sports probably accounts for something like $150 million in ad revenues on CBC TV, or presumably at least as much as CBC spends on sports.  CTV, one of CBC TV’s main competitors, generates much higher ad revenues, $784 million in 2011.  (Global TV, the other main competitor in the marketplace generated just under $500 million in ad revenue last year or about double that of CBC TV.)  But neither CTV nor Global normally derive much revenue from sports.  

Interestingly, even with the hundreds of NHL games carried on TSN/Sportsnet/RDS and the thousands of hours of other professional sports, the total ad revenues of the sports specialty channels are relatively modest, accounting for between $63 million and $129 million in 2011.  So in terms of advertising revenue derived from sports CBC TV generates more ad revenue than its main competitors and the all sports channels.  Of course, the sports channels make additional money from subscription revenues, which come in even when the NHL locks out its players. 

Monday 19 November 2012

CMRI Responds to Nordicity


CMRI’s critique of Nordicity’s study dealing with the role of advertising on CBC has generated a reply from Nordicity.  Nordicity’s reply was picked up by at least one news outlet.    In its reply Nordicity was very selective about the facts and made false statements about CMRI’s analysis. 

Nordicity’s reply to the CMRI critique did not deal with most of the major issues raised by CMRI:  the assumptions made about the cost of replacing ads, the claim that with as much as seven times the budget, CBC/Radio Canada’s audience share would possibly shrink to the levels of TVO/Tele-Quebec, etc. Instead Nordicity chose to deal with the following less important items.

Nordicity’s reply claimed that its report was not primarily about audiences: “Quite to the contrary, audience is a secondary concern of our analysis.  The primary concern is clearly stated in conclusion #4 on page 13:”  Here is that conclusion: “Conclusion #4: The PBS operating structure, revenue model, and program production financing could not be readily replicated in Canada.  If CBC/Radio Canada managed to do so, it would likely decline in audience terms to PBS’s niche presence in the market.” In its reply to CMRI Nordicity omitted to reproduce the second part of this conclusion, which seems ultimately to be all about audiences. The fact is that the word “audience” is mentioned over 30 times in the 27-page Nordicity report.

Nordicity’s reply claimed it did not confuse the term “rating” with audience “share:” “Your article implies we misled readers about PBS’s viewing level…In fact, we clearly state on page 13 of the report that PBS has a 1.3% rating:” This is a false statement: the word rating does not appear in the Nordicity report.  The word ratings does but is used in the generic sense. Putting aside the fact that the number 1.3% was two lines away from the word “ratings” in the actual report, Nordicity doesn’t mention that the sentence just prior to 1.3% read: “As a result, PBS now has a very limited audience share and impact on the U.S. market.”      

And, just what did Nordicity mean when it claimed PBS had a limited impact on the U.S. market?  If tonight the PBS news hour, a science program, an arts program and a drama were watched by different people and each program had a 1.3% rating, then the audience reach of PBS would be 5.2% (1.3%X4).  If this was repeated for the next week, the audience reach would be over 35%, which, assuming the programs were of high quality, would likely result in a very substantial impact on the market.     

Nordicity went on to compare PBS and CBC audiences: “In fact, CBC TV’s prime time audience share is double, which in audience terms is a very significant difference.”  CMRI originally pointed out that PBS has a very substantial following in Canada and it does so with no local stations, staff or infrastructure.  Hopefully CBC English TV with numerous stations and a large infrastructure, as well as about three quarters of a billion dollars in annual operating revenue, will draw a larger audience than PBS. 

Nordicity also took issue with our questioning Nordicity’s “estimate” of the cost of selling ads on CBC.  Nordicity put the cost of sales at about $25 million annually. CMRI pointed out that CRTC data showed that it was likely many times higher.  Nordicity in its reply said:  “In fact, we cited the CRTC as a source for our estimate in our report on page 16, Table 1.”  CRTC was mentioned along with four other sources for the table in question but Nordicity did not discuss the CRTC sales data at all. Moreover, why was Nordicity “estimating” the cost of CBC sales?  Why didn’t it just ask the CBC, its client?

Finally, Nordicity makes a blanket statement about CMRI’s competence: “In addition to these factual misrepresentations of our work, you make basic audience research errors and misrepresent your own survey data.” 

In its critique CMRI clearly referred to 10 years of data from its annual survey regarding attitudes toward TV advertising. Nordicity made the following false statement in its reply about CMRI’s annual survey: “Your survey cannot purport to state any facts about Canadians, since your survey is of “900 Anglophone respondents” and by definition excludes all francophone Canadians.”  In our analysis we usually only report Anglophone results and CMRI clearly stated: “The Media Trends Survey has been conducted for ten consecutive years and has surveyed over 15,000 Canadians in total in this period.”  Approximately 2,600 of those surveyed were Francophones, who responded to a separate French-language questionnaire in five of the last ten years.  Francophones have had almost identical feelings toward advertising but Nordicity falsely claimed we had no such data.

Nordicity’s reply to CMRI’s critique appears to be an attempt to deflect attention away from the major issues about advertising on CBC.  In our view Nordicity’s reply only casts further doubt on the validity of the original study about CBC and advertising. 

Thursday 15 November 2012

Are Pro Sports More Important Than Libraries, Books or Newspapers?


Last winter we asked a representative sample of Canadians what Canadian arts and cultural activities, including professional and amateur sports, they personally considered important.  We also asked whether people would be willing to pay for such activities.

Not surprisingly, pro sports were considered the most important activity when ranked by the percentage who said they were “very” important.  Libraries basically tied with pro sports.  On the other hand, amateur sports were considered no more important than theatre.  Such things as newspapers, movies and TV documentaries also scored highly with Canadians.  Newspapers are obviously not dead yet, even if readers have turned to the internet for classified ads and some other content that the paper used to feature.  Fiction and non-fiction books as well as museums formed a second group of activities next in level of importance.  Many of the more classical arts activities such as art galleries, theatre, painting, classical music and sculpture fared much poorer with the public and the least important activity was professional dance.  Interestingly, internet video and publications (including blogs I assume), also did not rate highly compared to other arts/culture choices.   Contemporary Canadian music fared only slightly better than classical music. The details are shown in the following chart:


Of course, results vary substantially within various demographic groups and readers are encouraged to request more details.  Two groups of Canadians who differ from the national averages are CBC Radio 1 and Radio 2 listeners.  Both Radio 1 and 2 listeners considered pro sports less important than libraries and newspapers, another positive sign for the newspaper industry and reading in general.  Radio 2 listeners also ranked museums and art galleries far ahead of many other activities. Radio 1 listeners ranked classical music well down the list, whereas Radio 2 listeners put it on par with fiction and non-fiction books. Despite the gutting of much classical music on Radio 2, current listeners remain supportive of it. Even among the high-brow CBC radio audience professional dance finished dead last in importance and many other traditional art forms like painting and sculpture fared relatively poorly.  The details for CBC radio listeners are shown below:  


The 2011 survey results are from CMRI's Media Trends Survey conducted November-December 2011 among a representative national sample of approximately 900 Anglophone respondents aged 18-plus.  Margin of error +/-3.3%.  The Media Trends Survey has been conducted for ten consecutive years and has surveyed over 15,000 Canadians in total. In our analysis we usually only report Anglophone results.   Both Anglophones and Francophones have been surveyed in this period, using questionnaires in each respective language.  Francophones have been surveyed in 5 of the 10 years.  To compensate for poorer response rates among younger adults results are statistically weighted in keeping with industry standards.  It is the only survey to have measured media use and attitudes continuously over this decade. The Media Trends Survey is not sponsored by any one industry or affiliated with a media company.