A 'Licence Fee' or 'Cable Tax' as Explained to the Senate

A "Cable Tax:" A Way CBC Can Fight for its Future

The CBC has not brought much attention to the fact that its current financial problem is caused mostly by funding cuts from the Harper government. Instead, CBC recently told the government it is “grateful” for the money its gets.

CBC is reeling from a $115 million dollar annual reduction in funding from the federal government, which fully kicks in this year. CBC seems reluctant to discuss that not only has the government cut the budget, it won’t provide any money for staff severance payments or inflation on salaries for those who remain at CBC. This is the first government in history that has not only cut the budget but treated CBC employees in this manner.

CBC has also lost all future advertising revenue from NHL hockey, although the president of CBC, Hubert Lacroix, has admitted that CBC was at best breaking even on the NHL. Yet Mr. Lacroix highlights the loss of hockey and a downturn in TV and radio advertising revenues generally as the culprits for CBC’s financial problems rather than government cuts. He at least has adopted the idea of a cable tax, or what might better be called a “Canadian programming fee” to fund CBC.

A cable tax seems an easy target for the cable and satellite companies to attack and the media would pile on, since no one likes a new (or old) tax.

The cable companies would hate the idea but what do average Canadians think about paying a little bit more for better quality Canadian TV programming?

First some background: previously it was pointed out that the entire Canadian English TV industry generates revenues from advertising, subscription fees and government of about $5 billion annually. The BBC alone has more funding than our entire TV industry. The U.S. TV industry, with which Canada's broadcasters must compete, had annual revenues in 2011 of $165 billion or 33 times that of Canadian broadcasters. Critics bemoan the lack of quality in Canadian TV compared to the U.S. but they offer no solutions other than to suggest Canadian TV (CBC) needs to be "cool" and make do with less money!  These critics have scant knowledge of how TV is financed or produced.  Don't get me started. 

What Canadian TV has always lacked is adequate funding that would allow for experimentation, expensive failures, and the occasional hit program. That is how the industry works in the U.S. and elsewhere. In Canada we have starved both CBC TV and private conventional networks of funds and neither CBC nor the privates can produce high quality TV drama that compares with HBO and other U.S. networks. Canadian TV will never produce a Six Feet Under, Sopranos or The Wire with the budgets given to Canadian writers and producers.

CBC can only afford to broadcast (in a good week) 2 hours of original prime time drama while Canadian private networks mostly buy U.S. dramas and air them at the same time as the U.S. networks. This allows cable and satellite companies to unplug the U.S. channel and replace it with the Canadian channel, meaning that viewers see the Canadian commercials on both the Canadian and U.S. channel.

CMRI tracks public opinion about Canadian TV and for over a decade we have asked Canadians if they would be willing to pay for better quality TV. Surprisingly, on average, about 4 in 10 have agreed to paying $5 more per month. So there is clearly some willingness to pay for better quality. $5 per month would be enough to dramatically improve the drama and other programming of CBC TV and private networks. 

Cable and satellite subscribers are far more willing to pay an extra $5 a month for better quality TV than people who watch TV off-air via an antenna. This makes sense. Off-air viewers have always been used to receiving TV for "free." Interestingly, willingness to pay for better quality TV is highest among those who voted Conservative in the last election, something the folks at Sun Media should take note of.

One of the great ironies in Canadian TV is that a large majority of Canadians think that a high percentage of their monthly cable bill already goes to CBC and other local stations. In our most recent survey only about 1 in 3 people thought that none of the money from their monthly bill went to local stations, almost 1 in 2 thought it was 10% of the bill and about 1 in 4 thought that 25% or more went to local stations. In other words, Canadians already think there is a cable tax!

On average Canadians think that about 20% of their bill goes to CBC and other local stations, when it is actually zero. Specialty channels, the majority of which are owned by cable and satellite companies, such as TSN and Sportsnet, receive a percentage of what you pay to Rogers, Bell, etc. but CBC and private TV networks that have local stations receive nothing. They can only benefit indirectly from a small cable fund that underwrites some of the cost of independent programming. If CBC, CTV, etc. were to get even 10% of our cable bill, it would amount to almost $500 million per year and change Canadian TV overnight.  If the cable tax were applied to internet and mobile telecommunications, which also distribute TV/video, it would raise more than $2 billion annually.

The survey data provide a clue as to how such a tax or programming fee could be introduced. Perhaps it should be a direct corporate tax on cable and satellite companies rather than on consumers. If cable companies chose to pass on the tax and try to blame it on the government or CBC, many subscribers would be very surprised, even perturbed to learn that Rogers, Bell and other TV distributors have not been giving some of the money to the CBC all along.

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.