CBC plans on cutting programs and services that many Canadians use and enjoy. The "plan" is to transfer money from existing services, such as CBC Radio, and funnel dollars into some as yet to be determined programs by 2020.
The president of CBC, Hubert Lacroix, made the announcement in a recent speech: "If we can't generate new revenues or our funding model doesn't change, we'll need to take existing dollars away from services we're currently offering, to pay for those we need to be offering in the future." He also makes a very good case for why Canada needs a public broadcaster. I feel for Mr. Lacroix. He is faced with a financial conundrum that seems unsolvable. But he must tread carefully and not throw the baby out with the bathwater.
The problem with planning for 2020 is that no one knows what the future holds. Five years ago there was no such thing as an iPad, the smartphone had just been introduced and Netflix delivered movies by mail. Technology is changing so rapidly, the best laid plan is to not commit past the current year but be nimble, allow creative people to take control and respond to new inventions as they are introduced.
Besides, most of the cool new technologies don't impact the way traditional radio and TV content is made but rather affect how content is distributed. Netflix figured this out and produces original series such as Orange is the New Black and House of Cards, series that could run on any TV network. Similarly, the music and the podcasts we stream from the internet are basically the same content that we consume on the radio. CBC bureaucrats, who have been called much worse here, need to be wary of the 'Steve Jobs syndrome' which convinces them they have the insight of Mr. Jobs.
The truth is that traditional radio and TV have not been replaced by the internet or other new technologies but instead have maintained their central role in our lives. Traditional TV viewing levels have, if anything, increased slightly in recent years. This is partly the result of improvements in picture quality (HDTV) and the inherent quality of programming. We are in the golden age of TV. Internet TV services, such as Netflix, are adding to our viewing time but mostly with old TV programs and movies.
Radio listening levels have waned slightly but CBC Radio's audience share has grown in the past decade. CBC presented the chart below to a Senate Committee earlier this year. Of the four CBC/SRC Radio services all but CBC Radio 2 increased audience substantially in the past decade. Radio 2 tried and failed to attract a younger audience, as radio listening by young people is in decline.
Overall, CBC Radio's audience share is three times that of CBC TV. Is the plan to cut CBC Radio? It has lost a fifth of its staff in the past 5 years and even more of its budget, while CBC TV has had only minor reductions.
Why cut CBC Radio, the most successful service and then announce possibly more cuts to fund an internet "digital" service that will likely deliver far less audience for the buck? The rationale of the president is that "70 per cent of listening in Canada takes place over the air." But then he adds, "When should we change our approach?" Answer: probably never, since the radio spectrum is the most efficient and effective way of delivering CBC Radio to listeners and will remain so for the foreseeable future. CBC radio (and TV) frequencies are its most valuable and irreplaceable asset.
Radio has always accounted for something like 70 per cent of listening, the remaining 30 per cent today is internet streaming and listening to music on iPods, iPhones, etc. A few years ago the 30 per cent consisted of listening to CDs, a few years before that it was cassette players and before that LPs and 45s. But over-the-air radio has always had a dominant role and that will continue, especially for CBC Radio listeners. CBC's research shows that a very tiny proportion of its listeners come from new digital platforms, so if Radio 2 were only on the internet, it would virtually disappear. Before shutting down Radio 2, set up a web site that allows Radio 2 listeners to contribute funds to support it, especially if it returned to all classical music.
As for TV, Mr. Lacroix said in his speech: "The advertising market is weak, down approximately 5 per cent overall in the last year. All signs point toward this not being a slump -- it's a new way of life, particularly as advertising dollars migrate to digital." But this is an incomplete analysis of the TV market. Yes, ad revenues of conventional TV have flat-lined but revenues (advertising and subscriptions) of specialty TV channels, such as TSN, Sportsnet and CBC News Network, have more than quintupled in the past 15 years and surpassed $4 billion in 2013. TV isn't going to go away and neither are advertisers.
Mr. Lacroix told the Montreal audience that ad revenue accounts for $250 to $300 million of CBC revenues. That's about $100 million less than he told the Senate in February. Assume the difference is the revenue that CBC will no longer derive from NHL hockey and it raises the question: why is CBC English TV in ad sales? CBC French TV for the first time will generate more ad revenue than its English sister and the head of French TV sales has been put in charge of sales for both services. French TV delivers an audience that can be sold to advertisers at attractive rates, whereas English TV does not. There is a cost to promoting and selling to advertisers and CBC should jettison advertising on any service, like CBC TV, that generates negligible returns with 10-15 minutes of highly repetitive, content-killing ads per hour.
The speech also referred to cable and satellite TV subscription having "plateaued," again implying that maybe its time to shut off TV transmitters. Car ownership and home ownership have also plateaued. That doesn't mean car dealers and real estate agents are going to shut their businesses. Also mentioned was cord-cutting, i.e., people cancelling their cable subscriptions and relying on internet-delivered TV. To date, the most reliable data sources, including Statistics Canada, show little evidence of cord-cutting. Cable companies still provide the most compelling programs and the easiest (and often the least expensive way) to access them.
The speech signals CBC has already concluded it should abandon TV transmitters and deliver programs via the internet. This would be ill-advised and before doing so Mr. Lacroix should ask the private TV networks if that's what they plan on doing. They know that far more than "5 per cent" of their audience comes from people watching TV off-air and today they receive favourable channel placement and multiplexing on cable systems, which they could lose if they abandoned their transmitters. Recently, CBC was impressed that 10 million hours of CBC's Sochi Olympics' coverage were streamed on the internet -- but about 1 billion hours, 100 times more, were watched on CBC TV networks, according to CBC data. How much revenue was generated by that streaming versus TV viewing?
CBC TV likes to compare itself to BBC. The Montreal speech refers to the BBC six times. The problem with this comparison is that BBC TV is a far more important service with a 30 per cent share of the TV audience in the U.K., while, according to CBC, its share of English TV viewing is about 5 per cent in a typical week. CBC TV has yet to embrace the reality of its ranking in the TV environment and until it does, it will fail to define a new role.
Nordicity ranked the audience delivered by public broadcasters in the U.K. (BBC) and Canada (CBC) and whether by share points or absolute viewers per public monies spent, the U.K. ranks far ahead of CBC, which is last among all the public broadcasters they studied.
Mr. Lacroix was out of date about how the BBC licence fee works but he was right to point out that BBC has far more resources because of the TV licence fee system. Every household in the U.K. must have a licence to watch TV on a TV set, computer, tablet, etc. CBC needs more funding, if it is to offer quality programming, and either a licence fee or a TV/video distribution fee or tax would be the mechanism to generate that funding.
If that fails to materialize, it doesn't mean abandoning conventional radio or TV or funneling money from successful programs and services into untried internet-digital concepts that will compete for audience with thousands of competitors. It does mean CBC bureaucrats should worry less about 5-year plans, gather and analyze all the facts, then design services based on traditional TV and radio delivery, and start proposing how a licence fee, distributor tax or other innovative new ways of funding CBC could work in Canada.
(Originally published in Huffington Post)
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